- MINING LAW REFORM

[Senate Hearing 111-116]
[From the U.S. Government Publishing Office]

S. Hrg. 111-116

MINING LAW REFORM

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HEARING

before the

COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

RECEIVE TESTIMONY ON S. 796, HARDROCK MINING AND RECLAMATION ACT OF
2009 AND S. 140, ABANDONED MINE RECLAMATION ACT OF 2009

__________

JULY 14, 2009

Printed for the use of the
Committee on Energy and Natural Resources

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COMMITTEE ON ENERGY AND NATURAL RESOURCES

JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel

C O N T E N T S

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STATEMENTS

Page

Baker, Phillips, Jr., President and CEO, Hecla Mining Company,
Representing National Mining Association, Coeur D'alene, ID.... 51
Butler, Jim, Attorney, Parsons Behle & Latimer, Salt Lake City,
UT............................................................. 21
Carlson, Cathy, Policy Advisor, EARTHWORKS, Boulder, CO.......... 44
Leshy, John, Harry D. Sunderland Distinguished Professor,
University of California, Hastings College of Law, San
Francisco, CA.................................................. 31
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 12
Nazzaro, Robin M., Director, Natural Resources and Environment,
Government Accountability Office............................... 39
Risch, Hon. James E., U.S. Senator From Idaho.................... 20
Salazar, Hon. Ken, Secretary, Department of the Interior......... 4
Udall, Hon. Mark, U.S. Senator From Colorado..................... 1

APPENDIXES
Appendix I

Responses to additional questions................................ 71

Appendix II

Additional material submitted for the record..................... 83

MINING LAW REFORM

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TUESDAY, JULY 14, 2009

U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:04 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Mark Udall
presiding.

OPENING STATEMENT OF HON. MARK UDALL, U.S. SENATOR FROM
COLORADO

Senator Udall. Good morning. The Committee on Energy and
Natural Resources will come to order. I'm pleased this morning
that our committee is conducting a hearing on two bills that
would reform the Mining Law of 1872.
S. 796 introduced by Senator Bingaman and S. 140 introduced
by Senator Feinstein. This is a matter of great interest in my
home State of Colorado. I'm a strong supporter of reform.
Unfortunately Senator Bingaman is unable to be here due to
the health care markup being undertaken at the HELP Committee.
I understand that the chairman has significant involvement in
the subject matter being taken up by that committee this
morning. Rather than postpone this important hearing, he asked
that I chair these proceedings.
In addition, Senator Feinstein had planned on offering a
statement here this morning. She too, has been called away on
important Senate business, the confirmation hearing of Judge
Sotomayor before the Judiciary Committee. Without objection her
statement will be submitted for the record.
[The prepared statement of Senator Feinstein follows:]
Prepared Statement of Hon. Dianne Feinstein, U.S. Senator
From California
Chairman Bingaman, thank you for the opportunity to speak to the
Committee about legislation that I've authored to establish a dedicated
funding source to clean up abandoned hardrock mines.
I agree that reform of the General Mining Laws of 1872 is long
overdue. I'd like to point out that this legislation is not intended to
be a comprehensive mining reform bill. It is, however, an urgently
needed piece of the puzzle.
The scope of the abandoned hardrock mine problem is enormous. There
are as many as 500,000 abandoned Gold Rush-era mines strewn across the
western states--47,000 alone are found in California.
These mines pose serious threats to public health and safety.
The legislation that I have introduced would: First, create an
abandoned mine clean-up fund that would be funded by fees and royalties
on the hardrock mining industry.
Unlike the coal industry, the metal mining industry does not pay to
clean up its legacy of abandoned mines. So, the bill would create a new
reclamation fee of 0.3 percent on the gross value of all hardrock
mineral mining on Federal, State, tribal, local and private lands. This
fee could raise approximately $50 million annually for cleanup.
The bill increases hardrock mining fees that are already in place.
It increases the annual maintenance fee from $125 per claim to $300,
the one-time location fee from $30 to $50, and the transfer fee from
$10 to $100. The fee increases will fund administration of the program
and any excess money will be deposited in the cleanup fund.
The legislation would also establish an 8 percent royalty on new
mining operations located on Federal lands, and a 4 percent royalty for
existing operations. The Congressional Budget Office estimates that
these new royalties would generate $160 million over four years. All of
this goes to mine cleanup.
Second, establish spending priorities for the cleanup fund based on
the severity of risk to public health and safety and the impact on
natural resources. This will ensure that the abandoned mines that pose
the greatest risk will be addressed first.
Third, direct the Secretary of the Interior to create an inventory
of abandoned mines on all Federal, State, tribal, local, and private
land. Unless we have a clear picture of the scope of the problem, we
can't fully address it.
I urge my colleagues in Congress to move swiftly to approve
legislation to address abandoned mines--before more damage is done.
why we need the legislation
Many abandoned mines are located in popular recreation areas. As
communities expand and off-road vehicles provide access to rural areas,
the public's proximity to open shafts, rotting structures and deadly
gasses is growing.
In the past two years, eight accidents at abandoned mine sites were
reported in California. Throughout the United States, at least 37
deaths occurred between the years 1999-2007.
The Department of the Interior has published a list of recent
deaths related to abandoned mines. The heartbreaking incidents ranging
from the deaths of a 13-year old girl to a Vietnam Veteran are all the
more devastating because they were preventable.
recent deaths at abandoned mines
On May 17, 2008 in O'Neals, CA, three men aged 23, 25, and
26 died from carbon monoxide poisoning while attempting to
reopen an abandoned Gold Rush-era mine. Their bodies were found
just 20 feet inside the mine. * On January 20, 2008, a 19-year
old man was fatally injured after falling into a 35-foot
abandoned mine shaft outside of Tonto National Forest in
Arizona.
On September 3, 2007, a 13-year old girl was killed and her
10-year old sister seriously injured when their all-terrain
vehicle fell 125 feet down an abandoned mine shaft in northwest
Arizona.
On May 3, 2007 a 63-year old man was killed when his Jeep
rolled off a narrow trail into an abandoned mining pit in
Virginia City, Nevada.

And still, too little is being done to clean up these dangerous
Gold Rush-era mines.
This past April, my staff went and took pictures of some of the
abandoned mines on Federal lands. As you can see, these sites present
serious safety threats.
chart #1: abandoned mine shaft, mojave national preserve
This is a photo* of Superintendant Schramm next to an abandoned
mine in the Mojave National Preserve. Park officials estimate the mine
is between 100 and 400 feet deep.
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* Photos have been retained in committee files.
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There are thousands of mine shafts like these all over our nation's
public lands.
These deep shafts can be obscured by debris, brush, and rolling
hills. The two girls in Arizona, who were riding off-road vehicles with
their family, had no warning before they plunged into the 125 foot
abandoned mine shaft.
At the bottom-right corner of the photo, a dirt road can be seen.
This road is used by visitors to travel around the park and it brings
them very close to the open shaft. Park staff reported that in March
2009 they saw a family camping near this shaft with two small boys
playing near the opening.
chart #2: skidoo mine, death valley national park
Abandoned mines are often thought of as holes in the ground, but
unstable structures--like the mill pictured here--are common hazards at
these sites.
This is what's left of the Skidoo Mine structure in Death Valley.
This mine was in operation between 1906 and 1917. During that time it
produced 75,000 ounces of gold, worth more than $1.5 million at the
time.
The mill sits atop a ridge overlooking the valley. It may appear
safe, but the image is deceiving. Wire suspensions installed by park
officials are anchoring it to the hill.
Sites like the Skidoo Mine are often the park's most popular
destinations. People just do not understand the danger, and park
officials struggle to keep visitors from exploring dilapidated ruins
and shafts.
chart #3: abandoned mine screen
Screens and other basic safety measures can prevent the most common
form of death associated with abandoned mines--falling down an open
mine shaft.
This photo shows an abandoned mine feature in Death Valley covered
by a screen. This shaft is less than five feet from road and is
believed to be between ten and 50 feet deep.
Signs and basic safety measures such as screens and fencing can
help lower the risk of accidents. This screen costs about $1,100 and
can be constructed locally.
interior department's inspector general report
A July 2008 report from the Interior Department's Inspector General
found that public health and safety has been compromised. It states
that, ``mines located primarily in the Western States of California,
Arizona, and Nevada have dangerously dilapidated structures, serious
environmental hazards, and gaping cavities--some capable of swallowing
an entire vehicle.'' Further, program mismanagement and perennial
funding shortfalls impede the cleanup.
Clearly, a consistent form of funding is badly needed to ensure
that cleanup continues and that basic safety measures, such as
installing signs and fencing, are undertaken--and that's why I've
introduced this legislation.
conclusion
The fact is that abandoned mines are public hazards and they need
to be addressed.
I look forward to working with members of the Committee, the
Department, and other interested parties to find a solution to this
long outstanding public safety issue. Thank you.

Senator Udall. Senator Bingaman has asked that I read his
statement into the record. I will proceed to do that. Before I
do so I want to say that I'm pleased to see 2 Coloradans here
today.
First, of course, is Secretary Ken Salazar, who will offer
the administration's position on the bills we're considering
today. The Secretary has substantial expertise on the whole
array of Western natural resource issues including mining. I
know his testimony will be of great value to the committee.
Second, Cathy Carlson, who is here on behalf of Earthworks.
Cathy has spent much time and energy on this important issue. I
look forward to hearing from her today as well as from the
other witnesses.
Now let me move to Senator Bingaman's statement.
Prepared Statement of Hon. Jeff Bingaman, U.S. Senator From New Mexico
The committee is conducting a hearing today on 2 bills, S.
796 and S. 140 which will reform the antiquated Mining Law of
1872, a law that governs the mining of hard rock minerals such
as gold, silver and copper from our Federal lands. When the
Mining Law was enacted in 1872 in the aftermath of the
California Gold Rush, Congress sought to encourage settlement
of the West. Congress did this by offering free minerals and
land to those who were willing to go West and mine.
In 1920 Congress enacted the Mineral Leasing Act and removed
oil, gas and coal and certain other minerals from the operation
of the Mining Law enacting a leasing system for those minerals.
In addition, Congress required payment of per acre rentals and
ad lorum royalties based on the value of production of the oil,
gas and coal providing a return to the public for the
production of publicly owned resources. However, as we all
know, the Mining Law of 1872 continues to govern the
disposition of hard rock minerals from Federal lands.
While Congress has stepped in and prevented the patenting of
lands through annual appropriations or riders, the patenting
provisions allow the transfer of mineralized Federal lands for
$2.50 or $5.00 per acre that are still on the books. In
addition, to this day under the Mining Law, billions of dollars
of hard rock minerals can be mined from Federal lands without
payment of a royalty. General land management and environmental
laws apply, but there are no specific statutory provisions
under the Mining Law setting surface management or
environmental standards.
Efforts to comprehensively reform the Mining Law have been
ongoing literally for decades. But results have thus far been
elusive. There is a growing number of people saying that
finally, this Congress may be the time to achieve this long
awaited reform. I hope that the Energy Committee can consider
and report Mining Law legislation this fall.
In introducing S. 796, my goal was to reform and modernize
the law governing hard rock mining. But to do so in a manner
that would allow our domestic mining industry to continue to
provide jobs and produce minerals important to our Nation.
The bill would eliminate patenting; impose a royalty on the
production of locatable minerals on Federal lands; make
statutory and modify requirements relating to permits,
financial assurances, operations and reclamation and inspection
and monitoring; require a review of Federal lands to determine
their availability for future location entry under the Mining
Law of 1972; and establish an abandoned hard rock reclamation
fee program to be funded by a royalty, a reclamation fee, a
land use fee and excess claim maintenance and claim location
fees.
S. 140, Senator Feinstein's bill, also addresses this
important issue, rather of abandoned hard rock mine
reclamation. This bill establishes an AML program funded by
royalties and a new reclamation fee on hard rock mineral
production. Abandoned hard rock mines pose serious public
health and safety, environmental problems. While estimates
vary, a recent survey of states indicated that there are as
many as 500,000 abandoned hard rock mine sites nationwide with
much of those in the West.
I look forward to working with Senator Feinstein on this
important aspect of Mining Law reform.
We are very pleased to have Secretary Salazar with us here
today. His testimony will be followed by an outstanding panel.
We thank you all in advance for being with us to discuss this
important topic.

Senator Udall. So again, that was Senator Bingaman's
statement for the record. Now it's my great privilege and honor
to turn to a son of Colorado, an individual for whom I have a
great respect. For all of us in Colorado, we're just so proud
that a son of Colorado is leading one of the most important
Cabinet agencies in the U.S. Government.
Interior Department Secretary Salazar, it's tremendous to
see you here today. Thank you for taking time from your very,
very busy schedule to be here to talk about this important
topic. The floor is yours.

STATEMENT OF HON. KEN SALAZAR, SECRETARY, DEPARTMENT OF THE
INTERIOR

Secretary Salazar. Thank you very much, Senator Udall. I
see you as the chairman of this committee and will call you
chairman, Senator. But as always from Colorado always have seen
you as a brother. Very proud of the work you're doing on behalf
of Colorado and the Nation on your participation on this great
debate.
Appreciate the great leadership of Senator Bingaman as the
chairman of the committee and Senator Murkowski. It's through
their joint leadership that this committee continued its fine
tradition of moving forward with what was truly bipartisan
energy legislation. I look forward to working with this
committee and with the U.S. Senate in the days and months ahead
as we move forward to the passage of what will be comprehensive
energy and climate change legislation.
It is a signature issue of our time. It is an issue which
we--I am confident we'll act on. We'll have a package done here
by the end of the year.
Let me, Mr. Chairman, speak now about the subject of this
particular hearing. That's the 1872 Mining Law. The 1872 Mining
Law from the point of view of the Department of Interior and
the administration is a law that must be changed.
It is a law that has been on the books now for 137 years.
Despite decade after decade of fights about how it is that we
should reform the Mining Law all of those efforts have failed.
Many a Senator and Congressman who has sat in these Committees
has tried to make those changes. Yet getting across the finish
line has proven to be very, very elusive.
We would hope that now in 2009, the time for change has
finally arrived. That we can get the different stakeholders
which include the environmental conservation community as well
as the mining community to help us forge a way forward for a
commonsensical reform of the 1872 Mining Law. It is important
for us to do that.
First, because the mining industry in our Nation is part of
the economic engine that creates thousands of jobs across this
country and all of us are dependent on the minerals that we use
whether it's the lighting in this room, the roof in this room,
the cars that we drive. It's so much of everything that we
touch every day is dependent on the minerals that come from the
mining industry here.
Good morning, Senator Wyden.
Senator Wyden. Good morning, Secretary.
Secretary Salazar. How are you, sir?
Second, it is also important for us to make sure that we
are protecting the treasured landscapes of America. That's both
with respect to new mining activities that occur on the public
lands as well as dealing with the legacy of the abandoned mines
which continue to be a scourge on water quality and other
environmental issues across the West.
Let me say as I look forward to working with this committee
on the reform of the 1872 Mining Law, there are four goals that
I have in mind.
The first of those is to make sure that we are supporting
mining on public lands. I will talk more about that.
Second of all, that we protect the environmental respect to
new mining activities on mining on the public lands.
Third, that we restore the environmental legacy of our
treasured landscapes by specifically addressing the abandoned
mines that we have so many of in the West.
Fourth, that we develop a legal framework here to provide a
fair return to the American taxpayer as we reform the 1872
Mining Law.
Those goals, those four goals support the vision of the
Department of Interior to first, create jobs here in the United
States through the balanced development of our natural
resources on public lands.
Second of all, creating jobs here in America through the
recreation and tourism that comes through the great use of our
treasured landscapes all across this country.
Now with respect to some background on the issue, I think
it's important for us to recognize what some of the key issues
are at stake.
First of all, mining is an important part of the United
States economy. We ought not to forget that. The gold industry
alone produces about 66,000 jobs here in the United States. In
Nevada alone the gold industry is the second. I think Nevada
alone is the fourth largest producer of gold in the entire
world. So it tells you the important economic contribution that
they make.
The United States of America is the second largest producer
of gold and copper. We know mining claims are still very much a
part of the public domain. We have about 76,000 mining claims
that are staked every year across the Bureau of Land Management
lands. We have about 400,000 mining claims that are currently
on the books that have been staked. So we know mining is
important to the economy of this country.
The next thing we should also remind ourselves of is that
the legacy of mining has not always been a good legacy for our
society. Back in 1872 when the Mining Law was created it was
clear that the policy objective at the time was we wanted to
open up the West by giving away land and giving away minerals
for companies to go and to settle and to develop that great
Western landscape. Much has changed since 1872.
Much of that great Western landscape has in fact been
developed. Population has grown. The same incentives that
existed in--that needed to be in place in 1872 are no longer
needed in today's population reality.
Nonetheless, the legacy of the mining tradition in the West
has scarred the environment. When we look at places like Clear
Creek County and Gilpin County in Colorado and so many places
across the entire West, we know that we have an abandoned mine
legacy that needs to dealt with. The BLM estimates alone, that
we have about 18,000 abandoned mine sites just on Bureau of
Land Management properties.
Yet, the efforts to try to clean up those abandoned mine
sites have proven to be very costly and has proven to very
elusive. So we need to address that reality of the legacy of
mining in the West. According to our estimates, about 40
percent of the headwaters of the streams across the West still
have some form of contamination, most of it coming from
abandoned mine which are the orphan mines that exist in many of
our Western States. So that issue is one that should be
addressed with respect to our reform of the 1872 Mining Law.
I mean, throughout in four concepts that I think are very
important with respect to reform of the law.
The first is patent reform. I believe that it is time for
us to change the way in which the public lands are patented.
Much of the public debate and the acrimony over what's
happening with the 1872 Mining Law is a strong perception that
lands that are worth, in some cases, hundreds of thousands of
dollars per acre are essentially being given away for $2.50 to
$5.00 an acre.
That creates a distrust in what the Federal Government is
doing with respect to the stewardship and ownership of the
public lands that we have. So we need to stop the patenting in
my view of mining claims across the West. But as we do that we
also have to recognize that tenure and security of tenure is
important.
Mining companies invest huge resources in their mining
operations. They need to have the security of tenure to be able
to not only permit, but also to finance those mining
operations. So Senator Bingaman's bill is an effort to try to
strike the balance between dealing with reform on the patenting
of these public lands and at the same time providing security
of tenure.
Second, we need to have reasonable royalties in my view. We
have royalties now that are paid for, most of the minerals that
we have in our public lands and yet somehow that has alluded us
with respect to hard rock minerals. But if you look at what's
happened in earlier or in later manifestations of the
management of mining on our public lands, we know, for example
in the Eastern part of the United States that royalties do
apply to mines and minerals that are mined on acquired lands.
But we know that with respect to pot ash and other minerals
that we actually have royalties that are collected there.
So what we need to do is to find the right level of
royalty. One that is not going to drive the mining industry out
of the United States of America so that those jobs are taken
elsewhere. But at the same time a level of royalty that assures
that there is a fair return back to the taxpayer here in the
United States. Senator Bingaman's bill attempts to provide a
range of royalties that is something that should be explored.
Hopefully that we can come to some agreement on what the right
level of royalty should be.
Third, environmental protection. Environmental protection
needs to be part of what we do with the reform of the 1872
Mining Law. Now some might say that we already have enough
environmental protection when it comes to mining operations
because you have the application of NEPA, the application of
FLPMA, the application of the Clean Water Act, the application
of the Clean Air Act. You have the application of the
Endangered Species Act.
So if you're a mining operator you already say that with
respect to new mines that are coming on board, they're already
this plenary of environmental laws that ensure that the
environment is going to be protected. On the other hand the
reality tells us that that is not always the case. On the other
hand when you look at the bankruptcies for example, the Asarco
in the West, you find a legacy of mining operations that
essentially have left environmental liabilities that
essentially have been assumed by the American taxpayer. So we
need to take a look at whether or not we have the appropriate
environmental safeguards with respect to current mining
operations.
Third, in the subset of environmental protection it's
looking back at the open mine sites and abandoned mines. You
know, for many of us who worked on issues like Good Samaritan.
We know one of the problems there is that there is no place
where we can go to find the money to be able to clean up these
abandoned mine sites and so they continue to tarnish the
landscape of the West, the landscape of places like Alaska.
Yet there is no place where we can get the financing to be
able to clean up these mine properties where nobody claims
ownership of these properties. So it seems to me that it's
appropriate to pursue the concepts of both Senator Bingaman and
Senator Feinstein have advocated here. Which is that we have to
create some kind of revenue stream to help us deal with the
abandoned mine site reality of the West.
Second as part of that, we also should take a good, hard
look at Good Samaritan legislation. We have tried that in the
past here in the United States Congress. It has not gone to the
point of conclusion. But there have been good discussion.
There are outstanding issues out there about who it is that
should be entitled to Good Samaritan treatment, about what
exactly that Good Samaritan liability protection should be,
what laws should be covered. That's all part of what should be
in the robust debate on an appropriate reform of the 1872
Mining Law.
Finally we need to try to get it done. Hopefully try to get
it done even within this Congress. There are some who say this
is not that important of an issue and that there are lots of
other issues which should take center stage.
I fully agree that we need to move forward with addressing
the energy and climate change challenge of these times. I
predict that we will do that. I would hope that we're able to
find a bipartisan way forward in getting that done.
I understand the importance of dealing with health care. I
know both Senator Wyden, Senator Cantwell and others on the
Finance Committee, Senator Barrasso, that have been spending a
tremendous amount of time on that issue. Those are signature
issues of our time.
But as we deal with those signature issues, it's also
important for us to take care of business that has to get done
because we have not been able to get it done for a very long
time. I'm hopeful that the 1872 Mining Law reform will be one
of those areas where we will be able to claim success in terms
of the change that we have been able to bring here to America.
With that, Mr. Chairman, I'd be happy to take questions.
By the way, let me just add I have with me today Sylvia
Baca, a native of New Mexico, who is the Deputy Assistant
Secretary for Land Minerals and Management. Mike Pool, who is
the Acting Director of the Bureau of Land Management and Mike
will be joining me up here. So, Mike if you will come join me.
Also Christopher Mansour and Sarah Bittleman, who many of you
on the committee staff know who know the issues of this
committee very well and who will be working with us as we move
forward.
Let me finally say, I looked around at the staff behind
you, Mr. Chairman. Both on the Democratic side and on the
Republican side I see some great people who I very much enjoy
working with. Thank you very much, Mr. Chairman.
[The prepared statement of Secretary Salazar follows:]
Prepared Statement of Hon. Ken Salazar, Secretary, Department
of the Interior
introduction
Thank you, Chairman Bingaman, Senator Murkowski, and Members of the
Committee. I am here today to discuss with you reform of the General
Mining Law of 1872, a complex matter and one that engenders passionate
views. Along with most of you, I have spent much time working on
various aspects of such reform. I am committed to working with you to
develop legislation that will accomplish the following: provide
industry with the regulatory certainty needed to make the investments
that produce mineral resources vital to our economy; provide a fair
return to the public for mining activities that occur on public lands;
protect the environment; and result in the cleanup of abandoned mines.
balance--energy development
Before I turn to Mining Law reform, I want to thank the Committee
for its work in reporting bipartisan energy legislation. I look forward
to working with the Members of the Committee in the days ahead to
address the challenges of energy and climate change.
The last time I appeared before the Committee, I spoke about
President Obama's agenda for energy development on the public lands and
the Outer Continental Shelf. While we have a lot of work ahead of us on
that front, we have made great strides at the Department under our
existing authorities as key steps on a comprehensive energy plan for
the Nation. We are balancing the responsible development of
conventional energy sources, while protecting our treasured landscapes,
wildlife, and cultural resources, with the accelerated development of
clean energy from renewable domestic sources.
With regard to conventional resources, since January the Department
has offered more than 2.3 million acres on our public lands for oil and
gas development in 17 lease sales, with over 780,000 of those acres
going under lease and attracting more than $60 million in bonus bids
and fees. We have plans for another 20 sales in the next six months,
onshore.
Concerning the Outer Continental Shelf, during the third week in
March, I traveled to New Orleans with the Minerals Management Service
to attend the Central Gulf of Mexico Oil and Gas Lease Sale 208, which
attracted over $700 million in high bids, with 70 companies submitting
476 bids on 348 tracts comprising over 1.9 million acres offshore the
States of Alabama, Louisiana, and Mississippi.
On the matter relating to oil shale, we will announce a second
round of research, development, and demonstration leases in Colorado
and Utah in the near future.
We continue working on a plan for the Outer Continental Shelf. I
extended the public comment period on the Draft Proposed 5-year Plan
produced by the previous Administration until September 21, 2009. At
that time I also requested from Departmental scientists a report that
detailed conventional and renewable offshore energy resources and
identified where information gaps exist. I held regional meetings with
interested stakeholders to review the findings of that report and
gather input on where and how we should proceed with offshore energy
development. I also crafted an agreement with Federal Energy Regulatory
Commission Chairman Wellinghoff clarifying jurisdictional
responsibilities for our respective agencies for leasing and licensing
renewable energy projects on the OCS, which will help facilitate the
development of wind, solar, wave, tidal and ocean current energy
sources. Several weeks ago I announced the issuance of five exploratory
leases for renewable energy production offshore of New Jersey and
Delaware.
We are also moving rapidly to implement the President's renewable
energy strategy onshore. During the last week in June the Senate
Majority Leader Reid and I announced a plan to expedite development of
solar energy projects on BLM lands in six western states. The two dozen
Solar Energy Study Areas will be evaluated for their environmental and
resource suitability for large-scale solar energy production, providing
a more efficient process for permitting and siting, and could
ultimately generate nearly 100,000 megawatts of solar electricity.
balance--mining reform
Balance is also an important concept as we discuss reform of the
Mining Law of 1872. While the responsible development of our mineral
resources is critical to both our economy and our environment, this
statute has not been updated in 137 years. In those years, much has
changed. As I previously noted, it is time to ensure a fair return to
the public for mining activities that occur on public lands and to
address the cleanup of abandoned mines. We must find an approach to
modernize this law and ensure that development occurs in a manner
consistent with the needs of mining and the protection of the public,
our public lands, and water resources. It is time to make reform of the
Mining Law part of our agenda of responsible resource development.
Much has been said about the role the General Mining Law of 1872
played in settling the western United States, how it provided an
opportunity for any citizen of the country to explore public domain
lands for valuable minerals, to stake a claim if the mineral could be
extracted at a profit, and to patent the claim. Numerous commodities
are mined, under the authority of the General Mining Law, to provide
the raw materials essential for the manufacturing and building
industries. According to the BLM, the 5-year average for new mining
claims staked annually under the law is approximately 76,000, with a
current total number of claims at nearly 400,000. These claims
generated almost $60 million in federal revenue--mostly from the fees
collected by BLM--in fiscal year 2008.
Our domestic gold mining industry alone directly or indirectly
creates more than 66,000 jobs and nearly $2 billion in earnings
annually. The United States is the second largest producer of gold and
copper in the world, and the leading producer of beryllium, gypsum, and
molybdenum. In my view, our own security depends on maintaining a
viable domestic mining industry. Metals and minerals are also needed to
support development of renewable energy.
As the United States Senate undertakes reform of the 1872 Mining
Law, patent reform, and the environmental consequences of modern mining
practices must be addressed in meaningful and substantive ways. In
addition, the American taxpayer should receive a fair return for the
extraction of these valuable resources and should expect the federal
government to develop a reliable process providing for the cleanup and
restoration of lands where the responsible party is unable or
unavailable to do so, including a Good Samaritan provision.
conclusion
Thank you again, Mr. Chairman, for giving me the opportunity to
present you the Administration's thoughts on this important topic. We
look forward to working with the Committee and all interested parties
as this process moves forward.

Senator Udall. Thank you, Mr. Secretary. Yes, of course,
your crack team is invited to sit at the table with you. Given
the busy schedule the Senate is facing, and the fact that I've
carved out all 2 hours to be here and that Senators Cantwell
and Barrasso and Wyden have taken time to join us, I want to
turn immediately to Senator Wyden and let him direct some
questions to the Secretary.
Senator Wyden. Thank you very much for your courtesy, Mr.
Chairman. It's great to see the Secretary. Once again on the
side of reform which certainly is needed.
In my view, after decades of taxpayer rip-offs and
environmental destruction, it is long past time to reform the
1872 Mining Law. For years you've had some very large companies
getting a sweetheart deal paying no royalties for the resources
removed from Federal lands. That's not right. They ought to
have to pay their fair share.
Now the legislation that we're reviewing today is
especially important for other reasons as well. We're going to
be looking, for example, at abandoned mine clean up. There are
more than 140 of them in my State alone. Several of them are
actually superfund sites that lack adequate funding for clean
up.
So what I'd like to do, Mr. Secretary, is spend a few
minutes talking with you about some of the key elements of
reform and getting your thoughts.
First, I'd like to ask your thoughts about royalty reform
as it relates to the mining area. The Bush administration's
Department of the Interior, for example, testified that they
would like to see a royalty system similar to the infamous
program that was exposed by the Interior Inspector General at
Minerals Management. I think that would be a very significant
policy error.
It's going to be important to get royalty payment reform
right. Could you just spend a minute or two ticking off first,
your thoughts about what the key elements of responsible
royalty reform would consist of?
Secretary Salazar. Thank you very much, Senator Wyden.
Thank you for your leadership on this issue and so many other
issues. From my point of view royalty reform, first of all, has
to be a royalty level, a royalty amount that will not drive
mining out of business. At the same making sure that we're
protecting the American taxpayer.
I know Senator Bingaman's bill has a range of, I believe of
up to 5 percent. I don't know and we don't have a position yet
on what exactly the royalty amount should be. But it should be
a fair return to the American taxpayer.
It also should be the kind of royalty that is transparent.
That is easily accountable for relative to the royalties that
need to be collected. You know, part of what we are looking at
with respect to an agency that you know so well, MMS, is how we
do royalty reform to make sure that we have accountability with
respect to the royalties that have to be paid. I think that the
lessons that we're learning as we do the review of MMS might be
very applicable to what kind of royalty mechanism is set up
with respect to hard rock mineral mining.
Senator Wyden. So you believe that as part of royalty
reform there should be more openness and more transparency so
that the public can actually see how these decisions are made.
Because that was part of the badly flawed approach that was
used at Minerals Management, the lack of openness was part of
the reason we saw that program tarred by scandal.
Secretary Salazar. I agree with you, Senator Wyden. I think
one of the things that we have to aim for is some simplicity as
well. I mean one of the problems we've already seen with
respect to MMS and the oil and gas royalty collection mechanism
is that it is very difficult to understand and very cumbersome
to actually make the collections that are accurate collections.
So we are looking at the proposals that we hope to bring
before the Congress that will deal with royalty simplification
in the oil and gas context. I think we'll those same lessons
would apply here.
Senator Wyden. One other quick question. I see the clock
has run on me. What are your thoughts about dealing with
abandoned mines?
One of the big issues with hard rock mining is when these
huge operations in effect, don't clean up after themselves.
Then there is huge taxpayer expense and big environmental
hazards. Now BLM has had a problem with making sure, for
example, that some of these large companies that have the
financial wherewithal to pay for clean up, do it. The problem
is that they're just shirking their responsibilities.
So what would be your thoughts on trying to make sure that
in the future we don't have those same problems where people in
effect mine, profit and run?
Secretary Salazar. Senator Wyden, I believe that the
legislation which Senator Bingaman has introduced addresses
that issue in part with the kinds of financial sureties that
have to be provided for mining operations. So, it is accurate
for you to conclude that there have been examples across the
public domain where companies simply have not had the financial
wherewithal to essentially complete the cleanup of mines once
mining terminates. That's a very appropriated issue for this
committee to consider as we deal with mining reform.
As I said earlier in my testimony the other part of it is
how are we going to deal with the legacy of abandoned mines
across the West including many of the mines that you indicated
exist in the State of Oregon.
Senator Wyden. I appreciate your views. I think you are
going to put the Department, finally, after years of ducking
this issue, you're going to put the Department on the reform
side of the agenda. I think in each one of these examples, the
kind of balance you're trying to strike is the way to go.
For example on that last point I made. When you have
companies that do have the financial wherewithal, these, you
know, huge companies, then we cannot let them walk away. If
we're talking about the smaller, you know, concerns, again,
you're going to have to try to strike a balance that's going to
work both for the environment and local communities as well as
the small companies.
I think you're prepared to strike that kind of balance. I
look forward to working with you. Thank you, Mr. Chairman.
Senator Udall. Thank you, Senator Wyden. We've been joined
by the Ranking Member, Senator Murkowski. I want to turn to her
for an opening statement and then any questions she might have
for Secretary Salazar.
Senator Murkowski.

STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA

Senator Murkowski. Thank you, Mr. Chairman. Welcome,
Secretary. It's good to see you. I am looking forward to your
visit to Alaska. We promise good weather and fine fishing and a
real education in your brief time up there, but we are looking
forward to it.
I have a longer opening statement that I would like to
submit the full statement for the record.
[The prepared statement of Senator Murkowski follows:]
Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
I want to thank Senator Bingaman for holding this hearing and the
witnesses for testifying. We are here to receive testimony on two
proposals to reform the 1872 Mining Law.
There is no question that the time has come to modernize this
statute and I support the enactment of comprehensive reforms to the
Mining Law.
These reforms must strike an appropriate balance between:
protecting the environment; ensuring a fair return for the taxpayer;
facilitating job growth; and maintaining a secure, domestic supply of
minerals.
It is very important that in attempting to fix problems with the
Mining Law itself, we do not create new ones. Upon reviewing the
proposals before us today, I found myself asking not what problems they
may create, but where to begin in listing those problems.
It is important that my colleagues and the public understand the
provisions contained in these bills, and in particular S.796. I will
focus on three of them.
First, Section 308 is simply called ``State Law'', which sounds
harmless. But this section drastically undermines a decades-old
decision by the U.S. Supreme Court governing state and federal
management of public lands. It is unclear why this Committee should
over-rule the highest court in the land, but as the debate moves
forward a full explanation of this provision is necessary so that we
may judge for ourselves whether or not it is warranted.
Second, Section 307 is called ``Land Open to Location''.
Ironically, this section could subject every federal acre to what can
only be described as a national referendum on the closure of those
lands to mining. A mere three years are allowed to complete this
review, and the section largely abandons the existing process for
withdrawals. That withdrawal process is not broken and, under the
auspices of `fixing' it, we should not put huge, additional swaths of
public land off-limits to domestic minerals production.
And finally, Sections 102, 201, 303 and 403 combine to increase
fees on every mining claim by as much as $616. They also impose an
additional government take of as much as 6 percent through a royalty
and other fees on production.
Let me be clear: hardrock mines on federal land should pay a
royalty, but there is too much at stake to go about imposing one in an
arbitrary manner. The absence of an analysis on the impact that these
new taxes and fees could have is made clear by the bill's reliance on a
percentage range, rather than a definitive and justifiable rate.
The margin of error here is very thin, and the provisions I have
listed are just a few of many that must be regarded with skepticism.
The U.S. currently attracts a mere 8 percent of global mining
investment, and both of these bills would likely reduce that amount
further still.
Reforms to the Mining Law should be developed with equal attention
paid to the importance of imposing a royalty and the necessity of
maintaining a role for mining in our economic recovery. A decrease in
investment will be accompanied by a decrease in job creation and the
security provided by domestic production of minerals. Such an outcome
must be avoided.
In these tough economic times, we should recognize that mining jobs
pay well, require a high level of skill, and provide an excellent
career path for those who pursue them. They are as important to our
economy as any green job, and a failure of mining reform proposals to
recognize that fact would be very problematic.
The policy changes proposed by these bills would have long-term
implications for the United States. Minerals are the building blocks of
infrastructure, technology, defense, and industry.
They are also essential to the new, clean energy technologies that
this very Committee has sought to advance in an aggressive way. We
import 100% of the quartz crystal for photovoltaic panels, 91% of the
platinum for fuel cells, 100% of the indium for LED lighting
technologies, and 100% of the rare earths for advanced batteries.
If we get mining reform wrong, we risk trading our reliance on
foreign oil for a reliance on foreign minerals.
It is for these reasons that reforms must maintain the viability of
domestic minerals production, and I am very concerned that the bills
before us today may fail to accomplish that task.
Mining reform should be a priority for this Committee, and it is my
hope that this hearing can serve as the beginning of an open and
bipartisan debate on what represents a responsibly balanced set of
reforms to the Mining Law.

Senator Murkowski. Very briefly before I move to my
questions, I think we would agree that it is well past time
that we modernize the statute, the 1872 Mining Law. I support
the enactment of comprehensive reforms to the Mining Law.
But I think we need to make sure that we're striking the
right balance. We always know it is about the balance. But the
balance between protecting the environment, insuring a fair
return for our taxpayers, facilitating job growth and
maintaining a secure, domestic supply of minerals. I think it's
very important that as we try to achieve balances in these four
areas in attempting to fix problems that we recognize exist
within the Mining Law itself, that we don't create any new
ones, so working on those laws of unintended consequences.
I do want to make it clear that I believe hard rock mines
on Federal lands should pay a royalty. But there's way too much
at stake to go about imposing one in an arbitrary manner. I
think we recognize that the margin of error that we have at
play is pretty thin.
The United States currently attracts a mere 8 percent of
global mining investment. The legislation that the committee is
looking at today, I believe would likely reduce that amount
even further. We've got to strike the right balance between
imposing a royalty and maintaining a role for mining in our
economic recovery.
When we look at mining jobs and the opportunities that they
provide, good paying jobs requiring a high level of skill, an
excellent career path for those that pursue them. We have an
opportunity coming online in southeast Alaska with the final
approval of the Kensington. That is going to be a couple
hundred really good paying jobs in an area where it is greatly
needed.
I have remained concerned that we're not keeping the eye on
the ball when it comes to security. We look at energy security
and the reliance that we have currently on foreign sources for
our oil. I think that we risk trading that reliance on foreign
oil for a reliance on foreign minerals.
We import 100 percent of the quartz crystal for
photovoltaic panels, 91 percent of the platinum for fuel cells,
100 percent of the indium for LED lighting technologies, and
100 percent of the rare earths for advanced batteries.
These are things we want to encourage as we move toward
this new generation of renewable energy sources. There are
several factors to focus on when we look at Mining Law reform
and how we achieve these balances, Mr. Secretary. I appreciate
your focus on them and your efforts within the Department.
I want to follow up with some of the comments from Senator
Wyden about the royalty rate. The royalty in S. 796, between 2
and 5 percent can vary among the different minerals. Your
Department would be tasked with the rulemaking.
You have to imagine that it's going to take a considerably
long time to complete the rulemaking. I am not going to task
you to estimate how long that process might be. But I do want
to ask that given the economic uncertainties that these
royalties will provide for the economics of a mine and the
current difficulties that we have presently with obtaining
financing.
How do we expect that anyone would be willing to invest in
a production of American minerals while this rulemaking is
ongoing? Are we in a situation now because of what is happening
through the Department, the rulemaking process, the credit
markets, that we're just simply not going to see any investment
in the industry? If so, does that concern you as it concerns
me?
Secretary Salazar. Senator Murkowski, first of all I'm very
much looking forward to seeing you in Alaska as well in August.
I look forward to seeing the State with you and with Senator
Begich when I'm there.
With respect to your question. There's a long time between
now and getting a Mining Law passed and getting the regulations
passed. But I would say two things with respect to the formal
issue that you really are driving that. That is providing
economic security and certainty for mining activities to
proceed.
Frankly, it seems to me that right now what is the most
jeopardizing issue if I was in the mining industry is not
knowing what's going to happen with respect to the 1872 Mining
Law reform. It's 137 years later and we're still talking about
what kind of change is going to be made. I think that that fact
of uncertainty probably is more of a chilling factor than
getting us to a point of certainty.
So if we get the Mining Law reform passed. It seems to me
that with respect to royalties.
No. 1, it's going to be very important for industry to know
what that royalty is so that then they can make their own
financial decisions relative to any particular mining
operation. Having a set royalty that is set will give them that
kind of guidance.
No. 2, it's important for us to make sure that we also have
a royalty collection mechanism that is simple and straight
forward so that we don't get into some of the complexities that
has caused problems in the oil and gas world. So our hope would
be to develop a collection formula that is simple and that is
transparent and that is understandable by industry and the
affected public.
Senator Murkowski. Let me ask you a question regarding the
impact that a particular royalty may have on the domestic
mining sector. This was asked last year. At that time the MMS
said, and I quote, ``MMS does not collect or have access to the
data necessary to determine the amount of revenue that would be
generated from a royalty. In addition, any such determination
would be purely speculative at this point as the effect of a
royalty on production quantities can't be ascertained with any
certainty.''
In response to another question about how a royalty would
impact the United States as a global competitor. The MMS
responded by saying the following quote, ``The MMS does not
maintain information on other Nation's take from hard rock
mining operations.''
So the question that I have for you, Mr. Secretary is
whether or not the MMS is still unable to analyze the effect of
a royalty and if they are, what should we here in Congress be
doing to delegate that responsibility? Because I think this is
one of those issues where we need to know how and whether or
not we can actually analyze this data. Do you know if that's
where we still are with MMS?
Secretary Salazar. Our Director for MMS will start on the
job on Wednesday. So we will charge her with a lot of things
including taking a look at this issue. There is a tremendous
amount of information that has been developed around royalty
collections in other countries as well as here. It seems to me
that it would be very appropriate for the Department of the
Interior and its agencies to be able to provide that
information to you.
Senator Murkowski. If you can put that on her list of to-
do's I think it would be important to know that we do have that
capability within the agency.
Secretary Salazar. I agree.
Senator Murkowski. I appreciate it. Thank you, Mr.
Chairman.
Senator Udall. Thank you, Senator Murkowski.
Senator Cantwell.
Senator Cantwell. Thank you, Mr. Secretary. It's good to
have you here. Thank you for your leadership on this issue as
you've just articulated it's long overdue. We hope this truly
is the year that we get something done.
I want to go back to Senator Wyden's question if I could
about financial assurances. Just to be clear, I wanted to make
sure, does the administration support the language that's in
the Bingaman bill on independent guaranteed reclamation bond to
cover the cost of maintaining treatment in perpetuity?
Secretary Salazar. As the case with most legislation we
will let the Senate work its will. But the concept however, is
one that we support. That is that we need to make sure that
when you have a mining operation that is set up you're going to
have the financial capability, essentially, to take that mining
operation from the responsibilities cradle to grave.
How exactly that ultimately is put together, we look
forward to working with you and other Members of the Congress
who have an interest in the issue.
Senator Cantwell. So you agree with the principle? You're
just saying you don't--the language is of less importance than
the principle.
Secretary Salazar. The principle of the financial
assurances of a company being able to do the reclamation that
is required is something that is important to us.
Senator Cantwell. Ok. Thank you. We obviously have had much
difficulty because under current law it's not possible for land
management agencies to balance the uses of public land when
considering mining operations because mining is considered the
highest and best use of public lands.
So do you support requiring new mines to not pose an undue
or unnecessary degradation?
Secretary Salazar. You know under the----
Senator Cantwell. We're trying to get at that language
where right now agencies look at new mines and say, well the
highest and best use of course is mining. So let's go ahead and
do the permit when there obviously are environmental impacts.
Secretary Salazar. In the current law we have that
authority at the Department of the Interior to make those
decisions if a mining operation is going to create undue
degradation to the environment we can turn down the mining
permit application. So we have that authority under the law. It
seems to me that as we look at mining reform that it's
important for us to address all of the issues that are on the
table, including that issue.
At the end of the day, we need to make sure that as we move
forward with allowing our public lands to be mined, which I
believe that we should, that we're making sure that there are
also areas that are sensitive that we can in fact protect.
Senator Cantwell. When has the Department of the Interior
ever turned down a mine based on this? Do you know or Mr. Pool,
do you know? When have we ever said that it would cause undue
degradation?
Mr. Pool. I don't have an example off hand. But I just know
that in recent years that the environmental compliance
standards are very rigid as it relates to permitting either
expiration or production through a mine plan. So that
authorization comes through all the environmental analyses
associated with various laws and usually in many cases, the
companies are able to achieve the standard. But that's only in
recent years based on our new 38-1 regulations.
Senator Cantwell. We need to address this issue because the
1872 Mining Law has been interpreted as the highest and best
use of public lands in a recent Environmental Impact Statement.
For a proposed Idaho gold mine the Forest Service emphasized
that it does not have the authority to select the no action
alternative. Recently in Arizona the Forest Service also
determined that it cannot consider a no action alternative when
it makes a decision on a proposed open pit copper mine despite
the far reaching impacts of depositing mine waste.
So I just want to make sure that we address that in this
underlying legislation. If you could look at that language and
give us comment on that, we'd appreciate it.
Secretary Salazar. We would be happy to do that, Senator
Cantwell. Let me just say that at the end of the day we're not
going to allow mining operations to move forward on public
lands if they're going to have the kind of degradation that has
occurred in some instances. But at the same time we need to
make sure that we are, from my point of view, supporting the
appropriate mining on our public lands that does not cause the
kind of environmental degradation that you're concerned about.
Senator Cantwell. Thank you. I would just, if I could, Mr.
Chairman, just thank the Secretary for nominating John Jarvis
for the Director of National Parks. We very much appreciate
that.
Secretary Salazar. Thank you very much. I think he will be
a great leader for our National Park Service and help us move
forward with a 21st century National Park System. The fact that
he's from Washington, knows Washington well and Alaska, lots of
places, he'll be a great friend of this committee.
Senator Barrasso. Thank you very much, Mr. Chairman.
Welcome back, Mr. Secretary. It's a privilege to have you back
here with our committee. We miss you.
I wanted to ask a couple questions about the practicality
of some of the things that are in S. 796 which mandates
reevaluation of Federal lands for withdrawal of minerals. It
would open up every single land management plan across the
country as I read it. It would give the agencies new powers for
mineral withdrawals and to me there's some serious consequences
of this.
Now the bill states the entire process would be completed
in 3 years. I just want to ask you a couple questions about the
practicality of such a massive undertaking. Is it really
possible in 3 years to do the sort of things that the bill is
asked to do? On average how many years does it take to develop
each resource management plan from start to finish?
Secretary Salazar. Senator Barrasso, first let me just say
that we have not had our people on board yet, including our
Assistant Secretary for Land and Minerals or a Director of the
BLM. So these questions of substantive policy are ones that we
will look at at the point when we get them on board. Hopefully
that will happen soon.
You raise a legitimate question. That is can the language
in this legislation be something that we can implement? I would
be happy to take a further look at the issue and get back to
you with a specific answer on it.
Senator Barrasso. I'd appreciate it because I know in
Wyoming there are folks that tell me this can take a decade to
get through. Especially when they're dealing with, you know,
appeals and litigation by activists to really work your way
through any one of these. Then it takes resources away from you
may have people doing otherwise.
I see Mr. Pool shaking his head yes. I mean, those are
concerns. I don't know if you, Mr. Pool, if you want to address
that as well?
Mr. Pool. Our language plans or resource management plans
are very comprehensive, time consuming effort which addresses a
range of various resource attributes including leasing, mining,
etcetera. So, but in all these plans we try to achieve balance
at it relates to good environmental compliance.
Senator Barrasso. You know, the concerns are it takes
resources away in terms of the resources that may be used to
work on grazing permits or other things unrelated to mining.
That's my concern, Mr. Secretary, in terms of how those things
will all get played out. Because you do a thorough evaluation,
it takes an extended period of time. You know, you have a
limited amount of resources.
So I don't know if there are additional plans, if need, for
the agency to pay for such a massive undertaking without short
changing the management of our Federal lands?
Secretary Salazar. We just, in general, responded to that
question, Senator Barrasso. So I think what I learned now on
the Executive branch is that it's one thing to authorize a law.
It's another thing to get it implemented faithfully on the
ground.
So much of that is resource driven. So if we are going to
move forward with a reform of the 1872 Mining Law, which we
strongly support, which I believe there's bipartisan support to
do a reform here. We also need to make sure that the resources
come along with a new Mining Law that allows us to faithfully
carry out the responsibilities assigned to the Department.
Senator Barrasso. If we can make sure that the unintended
consequences that we worry about in Wyoming, the impact on
other areas that are under the Department that may not be
specifically related to the Mining Laws. So thank you very
much, Mr. Secretary. Thank you, Mr. Chairman.
Senator Udall. Thank you, Senator Barrasso.
Senator Shaheen.
Senator Shaheen. I have no questions, Mr. Chairman.
Senator Udall. Senator Murkowski, do you have questions?
Senator Murkowski. I have no further questions for the
Secretary.
Senator Udall. Mr. Secretary, if I might just before you
return to all the other pressing missions that are before you.
You mentioned water resources and the importance of protecting
water resources. Would you comment more on how Senator
Bingaman's proposed way forward or Senator Feinstein's bill or
other measures such as the ones you've introduced here would
protect water supplies and what we need to consider as we move
forward?
Secretary Salazar. Thank you, Senator Udall. With respect
to both existing mines, new mines and abandoned mines, I think
that the issue of water quality is something which is in fact
addressed in both pieces of legislation. In the case of Senator
Feinstein's legislation the creation of a fund that would deal
with abandoned mines that creates in the case of Senator
Bingaman, he has language in there that would deal also with
existing mining operations and the kinds of financial
assurances that are needed in there to protect water quality.
There is a fact of life in the West and that is that we
have mines that have continued to degrade the environment
through the discharge of heavy metals and acid into many
streams. You know, as I've said in my opening remarks estimates
are that about 40 percent of the headwaters of streams in the
West are in fact affected by historic or current mining
operations. That impacts fisheries. It impacts other uses of
water quality.
So I think it's important for us to have a good look at
this issue as we move forward with the mining reform efforts.
As you and I know from our native State of Colorado, when we
look at the cool waters of Clear Creek, that at one point in
time were touted as supporting Coors beer, relative to the
water that was used for Coors beer. We know that Clear Creek
comes off the headwaters of Clear Creek including the north
fork of Clear Creek where we have thousands of abandoned mines.
So that's why you have a company like Coors that would very
much like to have Good Samaritan legislation so that they could
participate with others, local governments and non-profits in
trying to clean up these abandoned mine sites.
So there is a nexus between economic development and jobs
and economic security for this country and the cleaning up of
these mines. So I think that's why this subject, although it
may not be the most important subject before the United States
Senate today, very much is an important subject that I
appreciate your time and attention.
Senator Udall. Mr. Secretary, one final request. I presume
we can also keep the record open for a number of days and
submit questions to you and your team for replies.
But the analysis of the revenues that may be generated
under these two proposals, have you undertaken an analysis of
what sorts of revenue streams would be the result of putting
this legislation in place?
Secretary Salazar. Not as of this point to my knowledge.
But it would be something that we would want to work with the
committee on. I have asked Bob Abbey, who had his hearing
before this committee to put this issue as one of the important
issue to deal with as he assumes the reins of the BLM.
Assistant Secretary Wilma Lewis, likewise will be working on
this issue.
I think this is the kind of issue where I hope we're able
to transcend the polarization and the fighting that has taken
place over the decades that has kept us from finally getting to
a good reform of the 1872 Mining Law. I will pledge to this
committee and its members that our team at the Department of
the Interior will work with you to address the many questions
that will arise including the question, Senator Udall, that you
just raised. That is how much revenue would be generated from
both of those proposals or the questions that Senator Murkowski
and others have also raised with respect to the legislation.
Senator Udall. Before I turn to Senator Risch and then I
think we'll be able to bring the second panel forward. I did
want to know for the record that your comments about Coors are
particularly relevant to me since Colorado is the No. 1
producer of beer on a State to State basis. It's an important
industry in Colorado and it's important to all of us. So thank
you for making that point.
Senator Risch.

STATEMENT OF HON. JAMES E. RISCH, U.S. SENATOR
FROM IDAHO

Senator Risch. Thank you, Mr. Chairman. Colorado may brew
it, but Idaho grows the barley and the hops.
[Laughter.]
Senator Risch. First of all let me briefly say thank you
for your remarks, Mr. Secretary. I think all of us look forward
to trying to resolve this knotty issue. Better people than us
have tried and haven't been successful. But I hope with the
aging of the issue we will become more inclined to find a
middle ground to resolve this.
I think it's in everyone's best interest to get this
resolved. As has been pointed out here previously in the
hearing this morning, this has all got to do with the idea that
we need to have in mind, No. 1, obviously national security
interests because of the importance of some of the metals and
other products that are mined. Obviously the reliance we have
on foreign oil.
No. 2, the jobs that are involved here keeping in mind, of
course, what all of us want, and that is keeping the
environment such that people are not offended when a mining
operation is over as they are now, with some of the mining
operations that were done 100 years ago and some even abandoned
100 years ago. So thank you very much for your involvement in
this. I think all of us look forward to resolving these issues.
Thank you, Mr. Chair.
Senator Udall. Thank you, Senator Risch. Secretary Salazar,
if you have any final comments, the committee is certainly
eager to hear them. Otherwise we thank you for taking the time
to come to the Hill today.
Secretary Salazar. I'll only close, Chairman Udall, with
the following comment. That is that I do hope that we can get
to a common sense solution to this issue.
That I think everyone wants to get to a reform that makes
sense.
A reform that protects the environment.
A reform that protects the taxpayers of America.
A reform that does not send the mining industry fleeing
overseas.
I think in all that what we need to do is to come up with a
legislative framework that provides a certainty to all of the
affected stakeholders. My own view is I've thought about the
many members of the United States Senate and the United States
House of Representatives who have worked on this issue for in
some cases 30 years and have gotten nowhere. That this is a
real opportunity for this committee to lead and to fashion
legislation that will provide us that kind of certainty.
Thank you very much.
Senator Udall. Thanks again. Thank you, Secretary Salazar.
As Secretary Salazar leaves, the next panel can come forward.
We'll move right to the next panel's testimony.
Welcome. Good morning to this esteemed panel. We're looking
forward to your testimony. I would note that we have until
about 11:45 a.m. or 11:50 a.m.
So we want to move to hear your opening statements and then
questions. Senator Risch will operate in the ranking member
capacity. So without further ado and without long
introductions, we'll start from my left to right. We'll start
with Mr. Jim Butler, who is an attorney, Parsons Behle and
Latimer and from Salt Lake City.
Mr. Butler, please.

STATEMENT OF JIM BUTLER, ATTORNEY, PARSONS BEHLE & LATIMER,
SALT LAKE CITY, UT

Mr. Butler. Mr. Chairman, thank you for the opportunity to
appear here today. I appreciate your willingness to develop the
time to Mining Law issues. In particular I want to thank the
committee staff for the time it has invested in preparing S.
796 for review and discussion.
I've submitted a statement for the record that includes
detailed comments on both bills. But in the very short time
that I have to address you directly, I want to talk exclusively
about section 302 of S. 796 with establishes a single
permitting requirement for mineral exploration. Exploration is
important to the mining industry at all levels, large
companies, small companies and individuals and for all minerals
because without exploration mineral reserves cannot be replaced
and production and employment cannot be maintained.
Section 302 requires that a permit be issued before any
exploration activities regardless of size, scale or location
can begin. Section 302 thus eliminates an expedited process for
permitting small scale exploration that has functioned well for
30 years. To help you understand what these activities are I
have included a collection of photographs with my testimony.
These photos show the kinds of activities that occur under the
expedited process and also how those exploration disturbance
are reclaimed.
Let me describe the program that section 302 eliminates.
BLM's current regulations include a separate permitting process
for exploration where the total surface disturbance on public
lands are five acres or less. In those cases the operator is
authorized to file a notice. A notice is a document filed with
the BLM which includes information regarding the operator, a
description of the activities, a reclamation plan and a cost
estimate for completing reclamation.
Upon receipt of the notice BLM reviews it to determine if
it's complete and in accordance with the regulations. Typically
that review is accomplished by circulating the notice among the
resource specialists in the local BLM field office. After
determining that the notice is complete the BLM has several
options.
It can ask for more time. Says it needs more time for
review. It can require modifications to the notice or to the
activities to prevent unnecessary or undue degradation. It can
say that further consultation is required regarding access
routes or it can tell the operator that it needs to visit the
site.
If BLM takes none of these actions, that is if BLM has no
issues, no concerns and this is the key part of the process. If
BLM doesn't act then the operator may proceed with the
exploration once it has provided adequate financial assurance
in accordance with BLM's bonding regulations. There are limits
on where and what kinds of activities can be conducted under a
notice. Notice level exploration is not an option in areas that
are designated as closed to off road vehicles, areas of
critical environmental concern or proposed or designated
critical habitat for threatened or endangered species. Any
location if the exploration proposes to remove more than 1,000
tons of materials than a plan of operations must be filed.
BLM also retains authority to require that the notice be
modified if environmental problems occur. The notice program is
consistent with the recommendations of the National Research
Council Report, Hard Rock Mining on Public Lands which was
commissioned by Congress in 1999. The report concluded that
exploration disturbing less than five acres had little
potential for environmental harm and did not need to be
evaluated under the more detailed procedures applicable to
mining plans.
The notice provisions have created environmental benefits
because as operators seek to keep total disturbance under the
five acre limit they have a strong incentive to use existing
roads, minimize new surface disturbance and quickly reclaim
disturbed acreage. Use of the notice is common. In Nevada,
since 2005, BLM records indicate that notices have exceeded
plans of operation and that plans for mining production and
exploration plans beyond the five acre limit by approximately
10 to 1.
By eliminating the notice option S. 796 would have at least
two important adverse consequences.
First, permitting exploration would take longer and cost
more with no environmental benefit. The Forest Service doesn't
have this procedure and permitting comparable activities on
Forest Service lands takes 18 months to 2 years.
The second consequence is that BLM regulatory system and
personnel would be overwhelmed by the additional paperwork.
Loss of notice provisions would increase the work load on
mining permits almost tenfold. In most offices BLM resources
are already stretched thin, not just by mining but by all the
responsibilities that Federal law places on the agency.
If the notice program is eliminated approval time for
mining plans already measured in years would be further delay.
Thank you very much.
[The prepared statement of Mr. Butler follows:]
Prepared Statement of Jim Butler, Attorney, Parsons Behle & Latimer,
Salt Lake City, UT
introduction
Chairman Bingaman, members of the Committee, thank you very much
for the opportunity to appear before you again to discuss the U.S.
mining laws. By way of introduction, I am an attorney with Parsons
Behle & Latimer where I have worked since 1985. My firm has offices in
Salt Lake City, Reno and Las Vegas. We have been providing legal
services to the mining industry since 1882, when the two original
partners-mining lawyers from Carson City-formed the firm in Salt Lake
City.
My own legal career includes more than twenty years working for
dozens of mining companies exploring or mining on federal lands. My
clients have included some of the world's largest companies, junior
mining companies as well as individuals and small prospecting ventures.
I have served two years as Chair of the American Bar Association's
Mining Committee and four years as a vice-chair of the Public Lands
Committee. I am a member of the Board of Trustees for the Rocky
Mountain Mineral Law Foundation and in 2005, I was the Program Chair
for the Foundation's Annual Institute. I am also a member of the Board
of Trustees for the Northwest Mining Association.
My particular specialization is environmental permitting and
compliance for mining operations. I have helped clients permit more
than 30 exploration and mining plans of operations with the Bureau of
Land Management and U.S. Forest Service and have helped them obtain
related environmental and reclamation permits from state regulatory
authorities. I have also represented mining companies in administrative
and judicial appeals relating to their operating permits-before the
Interior Board of Land Appeals, state administrative appeal boards, and
federal courts in Arizona, Nevada, Montana and Washington. I also help
clients comply with environmental laws and regulations and review those
issues in property acquisitions.
Before joining Parsons Behle & Latimer, I worked in the office of
Utah Governor Scott M. Matheson, where I was his staff assistant on
natural resources issues. In that position, I was the primary contact
with federal land management agencies, including the BLM, Forest
Service and National Parks Service, under cooperative agreements
between the State of Utah and those agencies.
For your information, I am currently registered with the Senate as
a lobbyist on mining law matters for Barrick Goldstrike Mines, Inc.,
which is a subsidiary of Barrick Gold Corporation. I have worked with
Barrick on mining law legislation for more than a decade. However, I am
appearing today only as an individual and not on behalf of Barrick
Goldstrike or any other mining company or association. Obviously, my
views are influenced by all of my experiences, including my work for
the mining industry, but the views I express here today are my own, and
may or may not be the views of my clients.
current economic conditions
Mr. Chairman, as you know too well, the economy of our nation and
the world are in a far different condition than when this Committee
last considered this issue in September, 2007. The rapid downtown in
economic conditions in 2007 has hit the mining industry hard. In a
report released a few weeks ago, PriceWaterhouseCoopers summarized the
impacts on the mining industry, noting that in the first quarter of
2009 alone, 14 of the world's 40 largest mining companies announced
mine closures, production cuts or moves to place mines on care and
maintenance. In addition, $13 billion of capital expenditure has been
deferred or cancelled. Combined, this has resulted in unemployment for
more than 40,000 people across the industry.\1\ Despite the downturn,
costs of production have continued to soar, rising 27% in 2008
resulting in decreasing profit margins (or increasing losses) and
further cutbacks.\2\
---------------------------------------------------------------------------
\1\ Mine: When the Going Gets Tough . . . Review of global trends
in the mining industry - 2009, PriceWaterhouseCoopers (2009) p. 3.
\2\ Id. at p. 13. The study also noted that American producers have
been doubly disadvantaged by the combination of cost increases and
exchange rates. Id.
---------------------------------------------------------------------------
These same conditions have affected investment and operations in
the U.S., where major mining projects have been deferred or cancelled
and other properties are cutting costs to stay in business. The one
bright spot in the mining industry has been gold, where prices
increased as investors sought a safe haven from world economic
conditions. In Nevada, for example, in the northern counties where the
gold mining industry is based continue to enjoy low unemployment and
stable government revenues, even as the rest of Nevada has been hit
hard by the recession. However, gold prices have dropped 10% from the
highest point in the most recent price cycle and cost pressures
continue. The PriceWaterhouseCoopers study shows the impact of the
world recession on selected metals prices with a chart* that shows
price changes since 2003:
---------------------------------------------------------------------------
* Graphic has been retained in committee files.

Source: Mine: When the Going Gets Tough . . . Review of global
trends in the mining industry--2009, PriceWaterhouseCoopers (2009) p.
---------------------------------------------------------------------------
8.

The importance of the economic information in the context of your
consideration of S. 796 and S.140 is threefold: First, as you consider
measures to revitalize the American economy, you should not enact
legislation that has a contrary effect on the mining industry. Though
the total number of jobs may be relatively small, as the GAO reported
to you in 2008 ``hardrock minerals play an important role in the U.S.
economy contributing to multiple industries, including transportation,
defense, aerospace, electronics, energy, agriculture, construction and
health care.''\3\ The availability of minerals will also affect our
ability to achieve the objectives that Congress is setting for energy
independence and expansion of renewable energy resources, including
wind and solar power. Second, mining is the dominant economic force in
some local western economies-counties in Nevada, Arizona, Montana,
Idaho and New Mexico. Changes to the mining law should maintain, not
threaten these local economies. Finally, the data demonstrate the
simple fact that mineral commodity markets will always be cyclical.
High prices driven by demand increases trigger additional exploration
and investment. As production increases or demand falls, prices and
profits fall. Any mining law legislation-particularly the royalty
provisions-should moderate, not exaggerate the economic impacts of
normal supply and demand cycles. Because the 8% royalty in S.140 (and
Congressman Rahall's bill in the House) is assessed on gross proceeds,
it would hit mining operations hardest when prices are down by
decreasing gross revenues by an unavoidable 8%. In contrast, royalty
provisions of S.796 which are based on net proceeds would moderate the
economic impact of the royalty. When revenues are low or costs are
high, operations would pay less, allowing them to reduce costs and
maintain production and employment during tough times.
---------------------------------------------------------------------------
\3\ U.S. General Accounting Office, ``Hardrock Mining: Information
on State Royalties and Trends in Mineral Imports and Exports,'' GAO-08-
849R (July 21, 2008), p. 2.
---------------------------------------------------------------------------
s.796 and s.140
I will be providing comments on the royalty in S.140 and on
specific provisions of S.796. I understand that the Congress, the
Senate and this Committee are facing several extremely important and
pressing issues, including economic revitalization, energy independence
and problem of global climate change. Mr. Chairman, I appreciate your
willingness to devote the time and attention to the mining law that
your bill and this hearing represent. In particular, I know that the
committee staff has invested an incredible amount of time and energy
into this issue and into S.796. S.796 represents a major step forward
on some issues, particularly the royalty provisions of the bill which
recognize that a federal royalty on mineral production should be based
on net proceeds or profit, rather than on the gross income from mineral
sales. Unfortunately, S.796 remains seriously flawed and additional,
significant changes are necessary if it is to effectively accomplish
your stated objectives.
comments on s.140
S.140 includes the same royalty provisions that are in
Congressman's Rahall's bill in the House-an 8% gross royalty on new
mining operations and a 4% gross royalty on existing operations. S.140
also adds a .3% gross ``reclamation fee'' on all hardrock minerals
mining operations.
The royalty provisions of S.140 will substantially discourage
investment and production on federal lands. The royalty provisions in
S.796, which would deduct ``reasonable transportation, beneficiation
and processing costs'' from the value of production before the royalty
is applied, are preferable-though further clarification of the language
is needed to assure that the royalty is properly calculated and applied
as a net proceeds royalty.
A net proceeds or profit-based royalty has a less dampening effect
on mining investment. Mining investments typically seek a long-term
rate of return based on alternative investments and comparative risks.
A royalty payment based on a percentage of the total proceeds from
mineral sales directly reduces the potential rate of return-making all
mining investments less attractive. Because revenue projections (and
rates of return) are typically based on conservative price assumptions,
the possibility that prices may exceed expectations-along with profits
and royalty payments-does not reduce the initial projected rate of
return.
Authoritative studies\4\ of the application of mining royalties
identify several important considerations for determining royalty
rates: The first is how the royalty payments fits with the overall
economic contribution from mining activities. In testimony before the
House Committee on Natural Resources, James Otto, one of the authors of
the World Bank study on royalties, stated: ``I urge policy makers to
take into account the complete tax system when considering a change to
any part of it. It is the impact of the tax system as a whole that will
determine whether most mines are able to operate profitably, and with
sufficient profits to reinvest in new exploration to replace
reserves.''\5\
---------------------------------------------------------------------------
\4\ James Otto, Craig Andrews, Fred Cawood, Michael Doggett, Pietro
Guj, Frank Stermole, John Stermol and John Tilton, Mining Royalties: A
Global Study of Their Impact on Investors, Government, and Civil
Society, The World Bank (2006).
\5\ Hearing Before the Subcommittee on Energy and Mineral
Resources, Committee on Natural Resources, H.R.2262, Hardrock Mining
and Reclamation Act of 2007 (Oct. 2, 2007) p. 23.
---------------------------------------------------------------------------
In the U.S., mining on public lands produces substantial government
revenue, even without a federal royalty. Mining operations pay property
taxes, sales and use taxes, and business fees and taxes. In Nevada, for
example, where mine operators pay a 5% net proceeds tax that is shared
between state and county governments, the direct taxes paid by the
mining industry in 2007 totaled just under $200 million, including more
than $75 million in net proceeds tax.\6\ That calculation includes only
direct taxes and does not account for the income taxes paid by mine
owners or shareholders or the taxes paid by mine employees and
businesses that sell products and services to the mining industry.
---------------------------------------------------------------------------
\6\ John L. Dobra, Economic Overiew of the Nevada Mining Industry
2007, Nevada Mining Association (2008) at p. 8. Other direct taxes paid
included $93 million in sales and use tax and $27 million in property
taxes.
---------------------------------------------------------------------------
The second consideration identified by the World Bank study is how
a proposed royalty will affect mining investment. The 8% gross royalty
that would be imposed by S.140 would decrease investment, decrease
employment, and ultimately decrease total government revenues from
mining on public lands. The legislative record from the House is clear
on this point:

Mineral prices are notoriously cyclical, more so than the
prices for many other goods. The result is that high cost
producers may and often do become unprofitable during periods
of low prices. Royalty is a cost and if based on value, that
cost will be incurred regardless of profitability. More
marginal mines will close, perhaps permanently, in low price
times because of royalty. This is the nature of the market
system-low cost producers survive, high cost producers do not.
. . . The impacts from closing a large mine can be hard on
local communities, and can in the long run lessen overall
fiscal revenues.
Testimony of James M. Otto in Hearing Before the
Subcommittee on Energy and Mineral Resources, Committee on
Natural Resources, H.R.2262, Hardrock Mining and Reclamation
Act of 2007 (Oct. 2, 2007) p. 23.

If mining costs can't be deducted, a mining company would
have to pay the royalty regardless of how high these costs may
be for difficult mining situations or for low grade ores. This
would require a mining company to continue paying a royalty
even when it is operating at a loss, and that royalty could
even cause the loss. No mine can be operated long at a loss.
The result would be that some mines would shut down
prematurely, creating loss of jobs, federal, state and local
taxes not paid, and supplies of goods and services suffer.
Testimony of Jim Cress, Id at p, 26.

Testimony before the House Committee on Natural Resources also
indicated that the 8% gross royalty, and the total tax burden imposed
on the U.S. mining industry if the 8% gross royalty were added to
existing taxes, would be among the highest in the world.\7\ That same
testimony recounted the experience of other countries where revenues
from mining had actually decreased as the result of excessive gross
royalties. The House Committee apparently ignored this testimony when
it passed the current version of the House mining law bill. This
Committee should not make the same mistake.
---------------------------------------------------------------------------
\7\ See Hearing Before the House Subcommittee on Energy and Mineral
Resources (Oct. 2, 2007) pp. 30-43.
---------------------------------------------------------------------------
comments on s. 796
Substantial changes to S. 796 are necessary if it is to provide a
reasonable framework for hard rock exploration and mining on public
lands. My comments below recommend specific amendments but I have
prioritized my comments for this testimony and have not attempted to
present a complete or exhaustive list of the changes that should be
made.
permitting exploration activities
Section 302 requires that a permit be issued before any exploration
activities may be conducted on Federal land. This is a significant,
unnecessary and detrimental change from existing law and regulations.
Under current law, BLM allows an expedited procedure for small scale
exploration activities that has proven efficient and effective. S. 796
would eliminate that procedure.
BLM's surface management regulations for hard rock mining (43
C.F.R. Subpart 3809) include provisions for permitting exploration
activities where the total surface disturbance of public land is 5
acres or less. In such cases, the exploration operator is authorized to
file a ``Notice'' with the BLM which must include:

(1) Information describing the operator and identifying any
mining claims where surface disturbance will occur;
(2) A description of the proposed exploration activity with a
level of detail appropriate to the type, size and location of
the activity, including

a. The measures that will be taken to prevent
unnecessary or undue degradation during operations;
b. A map showing the location of the project area,
including the location of access routes that will be
used, improved or constructed;
c. A description of the type of equipment that will
be used: and
d. A schedule of activities, including the date when
exploration will begin and the date when reclamation
will be completed.

(3) A reclamation plan that complies with the performance
standards of the 3809 regulations; and
(4) An estimate of the cost to fully reclaim the operations.
43 C.F.R. Sec. 3809.301.

Upon receipt, BLM reviews the Notice to determine if it is complete
and in accordance with the regulatory requirements. Typically, the
review is accomplished by circulating the Notice package among the
resource specialists in the local BLM field office to identify
potential questions, information needs, conflicts, issues or concerns.
After the agency determines that the Notice is complete, BLM may notify
the operator that (1) more time is required for review; (2)
modifications to the proposed activities are necessary to prevent
unnecessary or undue degradation; (3) further consultation is required
concerning existing or proposed access routes; or (4) that a visit to
the site is necessary before proceeding. BLM may also notify the
operator that the proposed activities do not qualify as a notice-level
operation. If BLM takes none of these actions, i.e., requires no
further information or modifications, then the operator may proceed
with the activities once it has provided adequate financial assurance
in accordance with BLM's bonding regulations.\8\ 43 C.F.R. Sec.
3809.313. The financial assurance requirements for notices are spelled
out in the regulations at 43 C.F.R. Sec. Sec. 3809.551 to .556. The
financial assurance must be adequate to cover the cost as if BLM were
required to contract with a third party to reclaim the proposed
operations. 43 C.F.R. Sec. 3809.552(a).
---------------------------------------------------------------------------
\8\ Operators of Notice level exploration activities must also
comply with the requirements of BLM's regulations relating to use and
occupancy of unpatented mining claims.
---------------------------------------------------------------------------
Activities subject to the Notice level procedures are limited by
BLM's definition of ``exploration'' which includes ``sampling,
drilling, or developing surface or underground workings to evaluate the
type, extent, quantity or quality of mineral values present.'' 43
C.F.R. Sec. 3809.5.\9\ If the exploration involves bulk sampling that
will remove 1,000 tons or more of ore for testing, then a plan of
operations must be filed. 43 C.F.R. Sec. 3809.11(b). The Notice level
procedure is not available in certain areas, including areas designated
as ``closed'' to off-road vehicle use, Areas of Critical Environmental
Concern (ACEC's), or proposed or designated critical habit for
threatened or endangered species. See 43 C.F.R. Sec. 3809.11(b).
---------------------------------------------------------------------------
\9\ Attached to this testimony is a collection of photographs of
the kinds of activities-primarily exploration drilling-that are
commonly allowed under the ``Notice'' provisions in the regulations.
The photographs also show how surface disturbance from such exploration
activities is reclaimed, including recontouring of the disturbed areas,
revegetation and ultimately full reclamation that meets BLM's standards
for release of financial assurance.
---------------------------------------------------------------------------
After activities have begun, notices must be modified if (1) BLM
determines that changes are required to prevent unnecessary or undue
degradation, or if the operator plans to make material changes in the
plans or activities. 43 C.F.R. Sec. 3809.331.
The current regulations authorizing Notice level activities are
consistent with the recommendations of the National Research Council
report Hard Rock Mining on Public Lands which was commissioned by
Congress in 1999. The NRC Report concluded that exploration activities
disturbing less than five acres had little potential for environmental
harm and did not need to be evaluated under the more detailed
procedures applicable to mining plans of operations. The Notice level
provisions have also created some indirect benefits because as
operators seek to keep total disturbance under the five acre limit to
take advantage of the streamlined permitting procedures, they have a
strong incentive to use existing roads and minimize new surface
disturbance. Also, because the Notice is limited to five acres of
undisturbed public land, operators have a strong incentive to quickly
reclaim disturbed acreage.
In response to the recommendations in the NRC study, BLM made two
changes to the regulations: first, the Notice level option was limited
only to exploration activities-prior regulations had allowed ``mining''
operations under the same 5 acre rule. The NRC Report (and BLM's own
internal reviews) indicated that small ``mining'' operations had the
potential for environmental impacts because of the scale of disturbance
(removal of larger quantities of material versus exploratory drilling)
and the storage or use of chemicals in processing operations. Second,
BLM required bonding for all Notice level activities. These changes
were adopted initially in 2001 during the Clinton Administration and
were ratified in a subsequent 2003 rulemaking by the Bush
Administration.
The NRC Report recommended that the Forest Service modify its
surface management regulations to adopt a similar ``Notice'' procedure
for exploration activities that would disturb 5 acres or less of
National Forest lands. The Forest Service has proposed changes to its
36 C.F.R. Part 228, but those changes have not been finalized.\10\
---------------------------------------------------------------------------
\10\ The proposed changes in the Forest Service regulations did not
clearly limit Notice level activities to exploration-some mining
activities would have been allowed. Mining industry associations
(National Mining Association and Northwest Mining Association) and
others commented on the proposal and recommended that it be limited to
exploration in accordance with the recommendations of the NRC Report.
---------------------------------------------------------------------------
BLM has almost 30 years experience with Notice level activities and
more than seven years experience with the revised regulations.
Naturally, exploration is much more common than actual mining. Mining
geologists estimate that for every economically viable ore deposit that
is discovered and brought into production, as many as ten thousand
exploration targets are identified and explored without success. In
Nevada since 2005, BLM records indicate that Notices have exceeded
plans of operations (including both production and exploration plans
beyond the five acres threshold) by a factor of approximately ten to
one. While only about 70 mining and exploration plans have been
submitted and reviewed, exploration has gone forward under almost 700
notices.
The provisions in Section 302 of S.796 would have at least two
important adverse consequences: first, permitting mineral exploration
would take longer and cost more, with no attendant environmental
benefit. As noted, the Forest Service does not have a regulatory
provision similar to BLM's Notice procedures. All exploration
activities on National Forest lands must be permitted under a plan of
operations and reviewed under the National Environmental Policy Act.
Based on my own experience, the time for permitting Notice level
activities on BLM managed lands is a few months.\11\ Approval of those
same activities by the Forest Service typically takes between 18 months
and two years. The second consequence is that the BLM's regulatory
system and personnel-the resource specialists in the local BLM offices
that review Notices and mining plans and manage all of the other public
land resources-would be overwhelmed by the additional paperwork. Loss
of the Notice provisions would increase their workload on mining
permits almost tenfold. In most offices, BLM resources are already
stretched thin, not just by mining but by all of the responsibilities
that federal law places on the agency to manage energy, grazing,
recreation and the other uses of public lands. Approval time for mining
plans of operations-already measured in years-would be further delayed
as the agency devotes additional resources to processing hundreds of
new exploration permits.
---------------------------------------------------------------------------
\11\ The regulations provide that activities can proceed within 15
days after the Notice is submitted, provided that BLM finds the Notice
complete and does not require additional information. My experience is
that in most cases BLM seeks additional information or time to review
the Notice and that, by the time the financial assurance is submitted
and approved, the entire process can take several months. In Nevada,
the BLM and Nevada Division of Environmental Protection have created an
online reclamation cost estimating tool that allows operators to
calculate reclamation costs according to a set of standardized costs
and assumptions set by the regulatory agencies. That process
substantially speeds up bond calculations and approvals.
---------------------------------------------------------------------------
S.796 should be amended to allow the BLM to continue to administer
exploration activities that disturb five acres of less of public land
under the Notice provisions of the current regulations and to allow the
Forest Service to modify its regulations to include the same
provisions.
With regard to those exploration activities that will require an
exploration permit under S.796, the limitations in Section 302(b)
should also be amended. The current language prohibits the ``removal of
any mineral for sale'' under an exploration permit, but advanced
exploration may include removal of materials for processing to assess
their amenability to certain existing processing facilities. For
example, under an exploration permit an operator may want to remove a
bulk sample from the property and process it through an existing mill
or other processing facility to test or evaluate the metallurgical
properties of the ore. The mineral products from test processing may be
commingled with the output of the processing facility and sold. Such
tests are not uncommon and should not be prohibited by law. The
provision should be modified so that test mining or test processing can
be allowed under an exploration permit with 1) a de minimis exception
from the royalty for such activities, and 2) for production in excess
of the de minimis provisions, require that the proceeds from the sale
of mineral products be accounted for and subject to the royalty
provisions.
permitting of mining operations
As I read the provisions of Section 303, it intends to authorize a
regulatory program for hard rock mining on Federal lands that is not
dramatically different from current BLM and Forest Service operations
and policies. However, some important changes are necessary to make the
program workable, effective and consistent with existing law.
Section 306(c) reaffirms that the familiar standard ``unnecessary
or undue degradation of the lands'' standard from Section 302(b) of the
Federal Land Policy and Management Act (FLPMA) will apply to mineral
activities on public lands managed by the BLM and extends that standard
to National Forests. Because ``unnecessary or undue degradation'' is
the key term for management of mining under S.796, it should be
defined. BLM has managed public land under the ``unnecessary or undue
degradation'' standard for more than 30 years and has adopted a
definition of that term as it relates to mining in the 3809
regulations.\12\ 43 C.F.R. Sec. 3809.0-5. That definition should be
incorporated in to section 2 of S. 796:
---------------------------------------------------------------------------
\12\ BLM's current definition of ``unnecessary or undue
degradation'' was affirmed in Mineral Policy Center v. Norton, 292 F.
Supp. 2d 30 (D. D.C. 2003).

(22) Unnecessary or undue degradation.-The term ``unnecessary
or undue degradation'' means conditions, activities or
---------------------------------------------------------------------------
practices that:

(a) fail to comply with one or more of the following:
the operation or reclamation standards set forth in
this Act or in regulations promulgated thereunder, the
terms and conditions of an approved exploration or
mining permit or described in a complete notice, and
other Federal and state environmental laws related to
environmental protection and protection of cultural
resources;
(b) are not ``reasonably incident'' to mineral
activities. For purposes of this section, the term
``reasonably incident'' means the statutory standard
``prospecting, mining, or processing operations and
uses reasonably incident thereto'' set forth at 30
U.S.C. 612 and includes those actions or expenditures
of labor and resources by a person of ordinary prudence
to prospect, explore, define, develop, mine, or
beneficiate a valuable mineral deposit, using methods,
structures, and equipment appropriate to the geological
terrain, mineral deposit, and stage of development and
reasonably related activities;\13\ or
---------------------------------------------------------------------------
\13\ The definition of ``reasonably incident'' suggested here is
taken from 43 C.F.R. Sec. 3715.0-5 where the term is defined for
purposes of BLM's use and occupancy regulations.
---------------------------------------------------------------------------
(c) fail to attain a stated level of protection or
reclamation required by specific laws in areas such as
the California Desert Conservation Area, Wild and
Scenic Rivers, units of the National Wilderness
Preservation System, National Monuments and National
Conservation Areas.

Section 306(c) and (e) also create confusion because subsection (c)
sets forth the applicable ``unnecessary or undue degradation''
standard, but subsection (e) states that that standard shall be in
addition to any requirements applicable to mineral activities under
FLPMA, the National Forest Management Act of 1976 and the Organic Act
of 1897 (the Forest Service Organic Act). This provision might be read
to require that BLM and the Forest Service apply multiple overlapping
regulatory standards to mineral activities on Federal lands.\14\ S. 796
should be clarified to apply and define a single regulatory standard.
---------------------------------------------------------------------------
\14\ The two sections can even be read to suggest that because S.
796 adopts an ``unnecessary or undue degradation'' standard in section
306(c) but retains the FLPMA standard in section 306(e) that Congress
somehow intended that the agencies apply two different ``unnecessary or
undue degradation'' standards.
---------------------------------------------------------------------------
Section 306(d) authorizes the Secretaries of Interior and
Agriculture to jointly promulgate regulations to carry out the Act.
S.796 should include a transition provision to make it clear that the
BLM and Forest Service can continue to manage mineral activities under
their existing regulations (43 C.F.R. Subpart 3809 and 36 C.F.R.
Subpart 228) until joint regulations are finalized.
Provisions in Title III should also be evaluated in light of the
definition of ``Federal land'' in section 2(8). That section limits the
definition of ``Federal land'' to land that is ``open to location of
mining claims under the general mining laws and this Act.'' The term is
then used throughout S.796 in a context where the ``open to location''
limitation may be inappropriate. For example, Section 301 prohibits any
person from engaging in mineral activities on ``Federal land'' without
a permit. But the provision could be read to preclude BLM or the Forest
Service from allowing mineral activities on withdrawn lands even where
a claimant was able to demonstrate a valid existing right prior to the
withdrawal. The definition should be modified or specific clarification
written into the provisions where it is used.
security of tenure issues
S.796 eliminates the option to obtain patent to mining claims. If
claimants can no longer obtain title to the public lands within their
claims, the law needs to provide an alternative mechanism that protects
investments on unpatented claims. Several provisions in S.796 address
the rights of mining claimants and operators to use and occupy public
lands for mining purposes, but these provisions are incomplete and
inconsistent and are likely to confuse more than clarify. As written,
S.796 does not adequately define or protect the rights provided by the
U.S. mining laws as those laws have been interpreted and applied by
courts and agencies for more than a century.
Section 102(8) establishes that timely payment of claim maintenance
fees or performance of required assessment work is sufficient to
establish certain rights, but the provision falls short in two
important areas. First, the provision includes an incorrect reference
to the ``pedis possessio'' doctrine. That doctrine merely holds that a
claimant in occupation of his claim while he or she is exploring for a
valuable mineral deposit has the legal authority to exclude others from
the claim. Pedis possessio rights are not sufficient security of tenure
in unpatented mining claims to support investment in exploration or
mining activities. By incorrectly referencing the pedis possesio
doctrine, S.796 might be read to eliminate other important rights,
including rights that currently exist before claims are located or
valuable minerals discovered. The provision should be clarified to
ensure that the payment of claim maintenance fees insures all of the
rights traditionally associated with unpatented mining claims. Second,
the provision might be read to undermine the basic provision of the
mining law which guarantees that public lands are ``open'' for
exploration and the search for valuable mineral deposits. Some
exploration, particularly that which is presently classified as
``casual use'' under BLM's surface management regulations, takes place
before mining claims are located. In other words, reconnaissance level
field work may be completed to determine if claim should be staked. It
is important that this work be allowed to continue without the
prerequisite of claim location.
A related provision in the permitting title should be removed.
Section 301(c) provides that nothing in the permitting section of S.796
would change ``any requirement of law that a mining claim, millsite, or
tunnel site be valid in order for mineral activities to be
undertaken.'' This provision creates needless uncertainty in an area
where the law is well settled and confuses the permitting process.
BLM's current regulations provide that mining claim validity is
relevant to permitting only where the lands proposed for mineral
activities have been withdrawn from appropriation under the mining
laws. 43 C.F.R. Sec. 3809.100. Under those circumstances, BLM will not
allow activities under a notice or plan of operation to proceed until
BLM has prepared a mineral examination report to determine if the
mining claims were valid at the time of the withdrawal and remain
valid. Id.\15\ Such an examination is necessary to determine whether
the preexisting claims constitute ``valid existing rights'' for
purposes of the withdrawal.
---------------------------------------------------------------------------
\15\ The regulation allows certain activities if necessary to
maintain the affected claims or to confirm or corroborate the validity
of the claim. 43 C.F.R. Sec. 3809.100(b).
---------------------------------------------------------------------------
On land that remains open to location, a determination of mining
claim validity is neither necessary nor relevant to the permitting
decision. Even Professor John Leshy, who has argued that Interior
Department should use its authority to contest mining claims more
aggressively, has conceded that ``where the land remains open to
location of new claims, challenges to existing claims would usually be
uselessly burdensome and expensive.''\16\ Based on past experience,
Congress should expect that the provisions any of any amendment to the
mining laws will be heavily litigated. Section 301(c) invites
litigation and would likely send the reviewing Court on a quest to
determine what existing ``requirement of law'' Congress was
contemplating in the statutory language. Section 301(c) should be
deleted from S. 796.
---------------------------------------------------------------------------
\16\ John D. Leshy, The Mining Law: A Study In Perpetual Motion
(1987) at 262. At the time of Professor Leshy's book, claim contests
were the primary means of ejecting occupants who had taken up residence
on invalid mining claims. That problem was largely resolved by the
adoption of ``use and occupancy'' regulations which now govern such use
of mining claims and provide for expedited procedures to end
unauthorized occupancy. See 43 C.F.R. Subpart 3715.
---------------------------------------------------------------------------
Section 102(a)(4)(B) is also unnecessary and troublesome. That
provision bars a person (or a ``related party'') from relocating a
claim for ten years if that person had relinquished the claim or
allowed it to become null and void by not paying annual maintenance
fees or performing assessment work. Because the penalty is so severe,
the provision creates a powerful incentive for claimants to maintain
stale and unworked claims. One of the original objectives of the claim
maintenance fee was to discourage speculation and encourage claimants
to proceed with exploration or drop the claims. As mineral commodity
prices follow their normal cyclical patterns it is common to expect
that claims will be dropped when prices are low and relocated (by
original claimants or others) when prices are more favorable.
But the provision creates a more significant practical problem.
Claim relocation is a common strategy for correcting or curing problems
with mining claim titles or when mining claims locations have left
small pieces of unclaimed land adjacent to or between claims. It is
also common for claims to be changed from mining claims to millsite
claims (or the reverse) as more information on claim mineralization and
potential use becomes available. One of my partners at Parsons Behle &
Latimer who specializes in mining property law called the provision ``a
complete disaster.'' Section 102(a)(4)(B) should be deleted.\17\
---------------------------------------------------------------------------
\17\ If the concern is that claimants will drop and relocate claims
to avoid annual claim maintenance fees, the Committee should
investigate that concern more closely. In my experience, that is not a
common practice, if only because of the risks involved in dropping
claims. But if that concern is real, it is more easily addressed by
requiring claimants engaged in that practice to pay any missed
maintenance fees on claims that are dropped and relocated within a
short (probably one year) time period.
---------------------------------------------------------------------------
These provisions that address the operation of the general mining
laws are complicated by the language of Section 506(c) which states
that ``this Act supersedes the general mining laws, except for the
provisions of the general mining laws relating to the location of
mining claims that are not expressly modified by this Act.'' The
application of the mining law is illuminated by more than a century of
agency and judicial precedent which has clarified the many complexities
that occur in application of these laws to specific circumstances on
(and in) the ground. Section 506(c) seems to discard this precedent
inviting courts and agencies to rewrite or reinterpret the mining laws
on a blank slate. Even though that approach would provide endless
employment for future generations of mining lawyers, it would be an
unfortunate and inefficient result. Changes to the mining law should
incorporate and build upon legal precedent and history and not reopen
settled questions.
conclusion
Thank you for the opportunity to appear here today. I will be happy
to answer any questions.

[Photographs of Exploration Drilling and Reclamation on Federal
Lands have been retained in committee files.]

Senator Udall. Thank you, Mr. Butler. We now turn to Mr.
John Leshy, distinguished professor, University of California,
Hastings College of Law based in San Francisco. Mr. Leshy, in a
previous capacity also served as a Solicitor in the Department
of the Interior under Secretary Babbitt. Welcome.

STATEMENT OF JOHN D. LESHY, HARRY D. SUNDERLAND DISTINGUISHED
PROFESSOR, UNIVERSITY OF CALIFORNIA, HASTINGS COLLEGE OF LAW,
SAN FRANCISCO, CA

Mr. Leshy. Thank you very much, Mr. Chairman. I'm happy to
be here. I thank you for the invitation. I thank the committee
for its engagement on this issue. I echo Jim's comments about
the staff and all the work it has done, excellent work, on this
issue.
I'm here not representing any group. I want to briefly just
address a couple of issues.
First, Mining Law reform and jobs and the economy.
Everybody these days it seems is in favor of Mining Law reform.
I'm greatly heartened by that to hear that's there's been no
dissent in this room this morning on the need to get on with
this task. That's quite a difference from not too long ago when
the need for reform, the very need for reform was hotly
contested.
Everyone and certainly including me wants to do it in a way
that protects jobs and economic activity, particularly because
we're in this great recession. I have no doubt that the two
bills in front of this committee would preserve and expand jobs
in this economy if they were enacted. I say that for two
reasons.
First, generally broadly comparatively speaking this is a
pretty healthy industry. We're basically talking about gold.
That's, by far, the most important part of the hard rock mining
industry.
In my written testimony I show how gold prices and gold
production have dramatically boomed over the last 25 years. In
this country, domestic gold production is way, way up for a
variety of reasons. Interestingly at the same time, during that
same period when the Federal Government was moving for the
first time in history to regulate the hard rock mining industry
to protect the environment. I think that this leaves really no
doubt. That it's very powerful evidence that environmental
regulation and economic growth of the hard rock mining industry
are compatible.
Second, both of these bills would dedicate the revenues
raised by reform to abandoned mine land clean up. This is a
dedicated stream of revenues that will as Secretary Salazar
pointed out, create new jobs. These are good jobs. Many of them
are actually little different from the jobs involved in the
extraction process itself in terms of moving earth, waste rock,
re-vegetating and the like.
As many have pointed out hard rock mining on the Federal
lands have long enjoyed a unique position.
First, because practically every other user of the Federal
lands, oil and gas and coal, sand and gravel, timber, utilities
operating, transmission lines, ranchers, hunters, anglers and
recreationists, all pay something for the privilege of using
the Federal lands. The hard rock mining industry, traditionally
has not.
Second, practically everywhere this industry operates,
elsewhere, other than on Federal lands. So on State or private
lands and in every other country in the world, they pay
something. The Federal lands are really unique exception. It's
time to close that loophole. The financial provisions of both
of these bills would make very significant improvement over
current law.
The second area I will just mention very briefly. I address
it in my written testimony. That's the argument that sometimes
made that you can't extract more revenues from this industry,
particularly in terms of existing operations and existing
mining claims. That's a really flimsy legal argument I deal
with at great length in my written statement. I won't mention
it more here because nobody has raised it.
The third issue and last issue I want to address is the
authority of the government to control hard rock mining
operations from the standpoint of unacceptable environmental
damage. S. 796 does a couple of interesting and very important
things here.
First of all it simplifies the process for withdrawing
Federal lands from the operation of the Mining Law to protect
truly special places. Federal land managers have long used the
Land Management process that Acting Director Pool talked about
to make basic decisions about where land uses are appropriate
on particular areas of Federal land. But here as elsewhere the
hard rock mining industry has long enjoyed a kind of a special
protection from those withdrawal provisions.
Section 307 of 796 would substantially repeal that
prohibition. Be consistent with the general thrust of why we're
reforming the Mining Law which is to end this kind of unique
special treatment this industry has gotten. Make it subject to
the same kind of legal regime that all other users of the
Federal lands are subject to.
The other way that S. 796 addresses this important issue is
through the other provisions in title III which I think are
very important steps in improving and making more consistent
and predictable the Federal Government's regulation of hard
rock mining on its lands. Secretary Salazar, I thought, talked
quite eloquently about that and about the need in appropriate
cases to have authority to veto bad mines. There are not that
many, but sometimes bad mines are proposed that we know when we
approve them are leading to long term environmental damage and
cost to the taxpayer to clean up.
If the government is powerless to turn these things down,
even if a mine threatens some kind of environmental disaster
that would be unacceptable. I was very glad to hear Senator,
I'm sorry, Secretary Salazar say that he had the authority
under existing law which would be reaffirmed by S. 796. So
thank you for the opportunity to speak here today.
[The prepared statement of Mr. Leshy follows:]
Prepared Statement of John D. Leshy, Harry D. Sunderland Distinguished
Professor, University of California, Hastings College of Law, San
Francisco, CA
I appreciate your invitation to testify today, and the engagement
of this Committee on reform of the Mining Law of 1872. I appear here
today as a private citizen, expressing my own personal views, and not
representing any group or institution. I have worked on Mining Law
issues for thirty-five years, in academia, in government and in the
nonprofit sector. I have testified many times before this Committee and
its counterpart in the House on the subject. Today I want to address
some specific issues raised by the two reform bills before this
Committee:

1. The health of the hardrock mining industry and its ability
to compensate the American public adequately for the extraction
of publicly owned minerals.
2. Whether there are any constitutional or other legal limits
on the authority of the Congress to require existing hardrock
mining operations, or current holders of mining claims, to
provide such compensation.
3. The authority of the federal government, under both
current law and S. 796, to control and if necessary prohibit
hardrock mining operations that pose an unacceptable level of
environmental damage or unduly sacrifice other important values
found on federal lands.

On the first issue, gold is by far the most dominant hardrock
mineral governed by the Mining Law of 1872. Exhibit A charts* U.S. gold
production since 1840, before the fabled California Gold Rush that
ultimately led to enactment of the Mining Law.
---------------------------------------------------------------------------
* Exhibits A and B have been retained in committee files.
---------------------------------------------------------------------------
It shows that gold production greatly increased in the 1980s and
has remained high ever since. This resulted from two factors: high gold
prices, and development of techniques to recover gold from disseminated
low-grade deposits. The vast majority of that production is found on
federal or formerly federal lands.
It is also worth noting that this increase in production coincided
with, and was not hampered by, the U.S. Forest Service's and BLM's
first efforts to regulate hardrock mining to protect the environment,
through regulations adopted in 1974 (USFS) and 1981 (BLM).
Today, the U.S. is the fourth largest gold-producing country in the
world, behind Australia, South Africa and China. More than 80% of
domestic gold production comes from gigantic open pit mines in Nevada--
that State alone produces more gold than every other Nation in the
world except Australia, South Africa, China, and Peru.
Exhibit B charts the price of gold over the past forty years. It
shows a rapid increase in price in the late 1970s, and relative high
values since then. Indeed, since April 2001 gold has more than tripled
in value against the U.S. dollar, and the price has been hovering close
to $1000 an ounce. While that figure is, in real dollar terms, well
below the January 1980 peak, for a long time many investors have, in
times of serious economic difficulty like today, invested in precious
metals. As a result many observers expect the price of gold to remain
high for the foreseeable future.
The costs of mining gold in the U.S. are well under one-half of the
current price of gold. For example, the 2006 Economic Overview of
Nevada Mining, found at http://www.nevadamining.org/position/economy,
shows an average cost of production of $365 to $435 per ounce
(depending upon whether non-cash costs like depreciation and
reclamation are included). A February 2008 white paper by Standard &
Poor's showed that Barrick and Newmont, the two largest gold mining
companies in Nevada, had company-wide cash costs of between $282 and
$377 per ounce. See https://www.compustatresources.com/support/pub/
whitepapers/pdf/Mining.pdf
The domestic gold industry is, and for quite a long time has been,
very profitable--an enviable position today in comparison to the
economic carnage being visited across much of the American economy. It
can readily absorb the modest royalties and other payments called for
in the two bills before this Committee.
With one very modest exception, hardrock mining companies operating
today on federal land are charged no rental, pay no royalty, and make
no other payment in recognition of the fact that it is the people of
the U.S. who own the minerals they are mining. (The exception is that
those who hold mining claims on federal land pay a modest annual claim
maintenance fee, the revenue from which, by law, must be spent
administering the Mining Law, and not on other public purposes.)
The position of hardrock mining companies operating on federal
lands is unique in two distinct ways.
First, practically all other users of the public lands--oil and gas
and coal developers, operators of sand and gravel quarries, timber
harvesters, utilities operating transmission lines, livestock grazers,
even hunters, anglers and other recreationists--pay the government
something (in most cases, something like market value) for the
publicly-owned resources they are using and/or removing.
Second, practically everywhere else on the planet that hardrock
mining companies operate---on state or private lands in the U.S., and
just about everywhere abroad--they provide some compensation to the
governments and others who own the minerals.
It is long past time for Congress to close this glaring loophole.
The justifications that persuaded Congress 137 years ago to authorize
this giveaway of public property--when gold had strategic value and the
West was sparsely settled---have long since disappeared. Today 85% of
the gold mined is used to make jewelry, and the West has long been the
fastest-growing region of the country.
Both S. 796 and S. 140 contain several revenue producers. They
differ somewhat in the details.
s. 796
Section 102 of S. 796 would raise the annual claim maintenance fee
to $150. (Interior just raised the fee, effective September 1, to $140
per claim.)
Section 201 would establish a royalty from 2-5% of the ``value of
the production, not including reasonable transportation, beneficiation,
and processing costs.'' It authorizes the Secretary to vary the royalty
within this range for particular minerals, and to grant royalty relief
for mines that are in production if they can show by ``clear and
convincing evidence'' that absent a reduction, production would cease.
Significantly, S. 796 would exempt from royalty payments production
from federal land that, on the date of enactment, is subject to an
approved plan of operations and is in commercial production.
Section 303(f) would require operators to pay annually a ``land use
fee'' in an amount equal to four times the claim maintenance fee for
each 20 acres of federal land that is included within the mine permit
area. Payment of this fee would allow the operator to ``use and
occupy'' all federal land within the mine permit area for such uses as
are approved in the mining permit, if the uses are undertaken ``in
accordance with all applicable law.''
Section 403 would establish an abandoned mine land reclamation fee
on all hardrock mining--not just that found on federal lands--of from
0.3 to 1% of the ``value of the production, not including reasonable
transportation, beneficiation, and processing costs.'' For production
on federal lands, this fee would be added to the royalty established in
Sec. 201. Currently approved and operating mines are not exempt from
this fee.
All these funds, except for claim maintenance fees used to pay the
costs of administering the Mining Law, are to be deposited in a
Hardrock Minerals Reclamation Fund to be spent on abandoned mine
cleanup.
s. 140
The royalty in S. 140 (Sec. 101) is higher than that of S. 796. It
fixes a higher percentage (8% on new mines). Already approved and
producing mines would also pay a royalty, albeit at a lower rate of 4%.
Moreover, the royalty is levied on ``gross income,'' which would allow
companies fewer opportunities to game the system with inflated
deductions. S. 140's claim maintenance fee (Sec. 102) is also higher
than the counterpart in S. 796 ($300 as opposed to $150).
On the other hand, while Section 103 of S. 140 establishes a
reclamation fee, it is a flat 0.3% of the gross income of the operation
for each calendar year (the lower level of the range authorized by S.
796). S. 140 also exempts smaller operations, defined primarily as
grossing less than $500,000 per year and operating on claims previously
acquired from the government under the patent provision of the Mining
Law.
As with S. 796, the money raised by S. 140 goes into an Abandoned
Mine Cleanup Fund established by section 201(a) of the Act, except that
the claim maintenance fee revenues shall be allocated first for the
administration of the mining laws.
S. 140 does not contain a ``land use fee'' like that found in
section 303 of S. 796.
The financial provisions in both bills would be a very significant
improvement over current law. Given the hardrock mining industry's
legacy of unsafe and polluting abandoned mines that dot the landscape,
it is certainly appropriate to earmark the revenues from such
provisions for an Abandoned Mine Cleanup Fund, which should be
available without further appropriation. (The Fund in S. 140 is a true
revolving fund, not subject to further appropriation, but S. 796 seems
somewhat less clear, and I suggest clarifying it on this point.)
Given the industry's ability to absorb these payments without
substantial dislocation, I believe the provisions of S. 140 provide
more adequate return to the public than those in S. 796, with two
exceptions:
(a) S. 796 allows for a higher reclamation fee (up to 1% as opposed
to 0.3%), and
(b) S. 140 lacks the ``land use'' fee found in S. 796.
The case for including the ``land use'' fee can be put this way:
The royalty in both bills would apply only to ``production of all
locatable minerals from any mining claim located under the general
mining laws and maintained in compliance with this Act'' (S. 796, Sec.
201(a); S. 140, Sec. 101). I presume this limits the royalty only to
minerals extracted from federal lands.
Most of the domestic production of hardrock minerals comes from
very large operations in the West that are on lands in a mixture of
ownerships--private, state and federal. The ore body itself may not
include any federal lands, or at most mere slivers or odd-shaped
parcels intermixed with others. Very often, in other words, all or most
of the actual ore body is on non-federal land, usually because it has
already been patented (transferred into private ownership) for a token
payment of $2.50 or $5.00 per acre, under the generous terms of the
Mining Law. See, e.g., Mineral Resources: Value of Hardrock Minerals
Extracted From and Remaining On Federal Lands (GAO/RCED-92-192, August
1992).
Even where the U.S. no longer owns any part of the ore body,
thousands of acres of federal lands are typically used to bring the
mineral into production, primarily for dumping waste rock and mine
tailings and processing the ore. These uses are effectively permanent
and exclusive, as the land is, for all practical purposes, rendered
unusable for things like ranching, forestry, wildlife habitat, and
recreation.
Under current administration of the Mining Law, the U.S. receives
no compensation for the use of its land for waste dumps and tailings
piles, if they are claimed as ``millsites.'' If hardrock mining
companies were required to use Title V of the Federal Land Policy and
Management Act of 1976 to gain permission for this use of federal
lands, they would be required to pay fair market value, just as do
others who use the federal lands for industrial uses like power plants
or other facilities, transmission lines, water projects, and
practically everything else.
Therefore it is appropriate to require hardrock mining operators,
who permanently encumber thousands of acres of federal land as dumping
grounds for waste, to pay a fee. The fee should reflect the value the
federal lands contribute to the entire mining operation.
The next issue I want to address is whether there are any
constitutional or other legal limits on the authority of the Congress
to require existing hardrock mining operations, or current holders of
mining claims, to compensate the public. The industry and its
supporters have sometimes argued that mining claims are property
interests, and therefore any requirement that existing claimants pay
the public something for extracting federal minerals is a ``taking'' of
their property.
With all due respect, this is a very flimsy argument. The truth is,
there are very few legal limits on Congress's ability to apply reforms,
including a royalty or other fees (or tighter environmental
regulations, for that matter), to existing mining claims or to existing
operations.
First of all, probably most mining claims found on federal lands do
not have property rights against the U.S. at all. Many decisions of the
U.S. Supreme Court, dating back decades, make clear that a mining claim
located on the federal lands carries with it a constitutionally
protected property right only if it contains a ``discovery'' of a
``valuable mineral deposit.''
Mining claims which lack such a ``discovery'' are mere licenses to
occupy the federal lands. In other words, the legal status of locators
of such claims is no different from that of a hunter or angler or other
recreational user of federal lands. ``[I]t is clear that in order to
create valid rights . . . against the United States [under the Mining
Law] a discovery of mineral is essential.'' Union Oil v. Smith, 249
U.S. 337, 346 (1919); see also Cole v. Ralph, 252 U.S. 286, 296 (1920).
The locator of a claim who has not made a ``discovery'' does have
the right to exclude other mineral explorers from the claim, so long as
the original locator is actively exploring for a mineral. This is the
``pedis possessio'' (foothold) doctrine recognized by the Supreme Court
almost ninety years ago. Union Oil v. Smith, supra. But the locator has
no rights against the United States until a discovery is made.
In practice, almost all mining claims are located for exploration
purposes, in speculating that a mineral might possibly exist and be
profitably mined from the claimed land. But hopes and speculations, the
Supreme Court has long made clear, are not tantamount to a
``discovery.'' See, e.g., United States v. Coleman, 390 U.S. 599
(1968); Sullivan v. Iron Silver Mining Co., 143 U.S. 431 (1892). Thus
most mining claims are not constitutionally protected property rights,
and the United States has virtually unfettered authority over them,
without any obligation to compensate the claimants.
With regard to mining claims that do include a ``discovery,'' the
analysis is a little different. Such claims do contain property rights,
but the government's authority over them is very broad as well. The
U.S. Supreme Court addressed this exact question in 1985, and its
guidance is worth quoting at some length:

Even with respect to vested property rights, a legislature
generally has the power to impose new regulatory constraints on
the way in which those rights are used, or to condition their
continued retention on performance of certain affirmative
duties. As long as the constraint or duty imposed is a
reasonable restriction designed to further legitimate
legislative objectives, the legislature acts within its powers
in imposing such new constraints or duties. * * *
This power to qualify existing property rights is
particularly broad with respect to the ``character'' of the
property rights at issue here. Although owners of unpatented
mining claims hold fully recognized possessory interests in
their claims, we have recognized that these interests are a
``unique form of property.'' * * * The United States, as owner
of the underlying fee title to the public domain, maintains
broad powers over the terms and conditions upon which the
public lands can be used, leased, and acquired. See, e.g.,
Kleppe v. New Mexico, 426 U.S. 529, 539 (1976). * * *
Claimants thus take their mineral interests with the
knowledge that the Government retains substantial regulatory
power over those interests. * * * In addition, the property
right here [in a mining claim with a valid discovery] is the
right to a flow of income from production of the claim. Similar
vested economic rights are held subject to the Government's
substantial power to regulate for the public good the
conditions under which business is carried out and to
redistribute the benefits and burdens of economic life.

United States v. Locke, 471 U.S. 84, 104-05 (1985) (emphasis
added).
The government retains the right to require a payment (whether
labeled a tax, royalty, fee, or something else) from a holder of a
mining claim on federal lands, even one with a discovery and a property
right, as part of its broad authority to adjust the ``benefits and
burdens of economic life.''
This simply follows from the principle the Supreme Court has long
followed, that federal taxes and fees cannot constitute compensable
takings of private property. See, e.g., Cole v. LaGrange, 113 U.S. 1, 8
(1885) (``the taking of property by taxation requires no other
compensation than the taxpayer receives in being protected by the
government to the support of which he contributes''); County of Mobile
v. Kimball, 102 U.S. 691, 703 (1880) (``neither is taxation for a
public purpose, however great, the taking of private property for
public use, in the sense of the Constitution'').
Health, safety and environmental hazards are a large and continuing
legacy of the hardrock mining industry operating on federal lands. This
makes it particularly appropriate to tax, or levy a royalty or fee on,
hardrock mineral production, or on the use of federal lands to support
such production, for the purposes identified in S. 796 and S. 140--to
fund cleanups of abandoned mines.
While Congress has ample authority to impose a royalty or other
levy or to tighten environmental regulation of existing claims,
obviously Congress can take equitable considerations into account, such
as capital investments that have already been made in existing mines.
S. 140 attempts to do this by reducing the royalty to 4% for production
that is ``subject to an operations permit on the date of enactment,''
and is actually in production.
S. 796, on the other hand, contains a permanent exemption from any
royalty payment if the mine is ``subject to an approved plan of
operations or an operations permit'' on the date of enactment, and is
actually in production. While it is reasonable to levy a lower royalty
on existing production, at least for a period of time, I am troubled by
a permanent exemption or permanently lower royalty on existing mines.
Large hardrock mines can produce for much longer periods of time
than most other capital investments. The Bingham Canyon copper mine
near Salt Lake City, for example, has been in production for more than
a century, and according to some accounts may continue to produce for
several more decades. If S. 796 had been enacted in 1890, for example,
Bingham Canyon production would still be royalty-free. It is very hard
to justify exempting existing mines from a royalty beyond a reasonable
period to amortize the investment involved.
Moreover, I am troubled that the line drawn in both bills between a
full royalty, on the one hand, and a reduced (S. 140) or no (S. 796)
royalty, on the other, is very fuzzy and will be hard to administer.
The touchstone in both bills for more favorable treatment is whether
production is ``subject to an operations permit'' (S. 140) or ``subject
to an approved plan of operations or an operations permit'' (S. 796) on
the date of enactment. Although I have not made a detailed examination
of the matter, I do not believe that ``plans of operations'' or
``operations permits'' define the scope or duration of approved
operations with any precision. Yet some precision is required when it
spells the difference between paying a full royalty or a lower rate (S.
140) or nothing (S. 796). With many millions of dollars at stake,
companies will argue that their approved plans or permits are for the
``life of the mine,'' and if they succeed, the revenues to be derived
from either reform bill could be drastically reduced.
I suggest that the Committee work with the Interior and Agriculture
Departments, perhaps with the assistance of the Congressional Budget
Office or the Government Accountability Office, to look hard at the
terms of the BLM and Forest Service's approvals in these operating
permits or plans of operations and see if a more precise line can be
drawn.
Some hardrock industry supporters want an even more generous
approach, to exempt all existing mining claims, and not just existing
active operations, from a royalty or other reforms. That should be
strongly opposed. Most areas of federal land with significant mineral
potential are already blanketed with speculative mining claims. As I've
already explained, most of these claims lack a discovery and a
concomitant property right. Most have seen little investment or action,
beyond paying annual claim maintenance fees. Most mines likely to open
in the next few decades will probably be on already-located claims.
Thus exempting existing claims from new requirements (permanently, or
for a period of years) would be a huge loophole, would generate little
if any revenue to clean up abandoned mines, and would hardly constitute
genuine reform of the Mining Law.
I believe, as I indicated earlier, that any levy Congress might
enact will be a small factor in the overall profit and risk picture for
these enterprises. Furthermore, S. 796 (though not S. 140), provides
considerable flexibility (too much, I believe) in levying royalties.
Specifically, the executive is given authority to (a) fix the rate
between 2-5%; (b) define ``reasonable transportation, beneficiation,
and processing costs'' that are deducted from gross income in setting
the royalty base; (c) set the royalty mineral-by-mineral (Sec.
201(b)); and (d) grant relief from royalty payments when the miner can
demonstrate that otherwise a shutdown would occur (Sec. 202). In this
connection, an idea worth considering is to make the payments to the
government on a sliding scale depending upon the market price of the
commodity; e.g., if the price of gold doubles or is halved, the royalty
could be adjusted accordingly.
The third and final issue I want to address is the authority of the
government to control, and if necessary prohibit, hardrock mining
operations from going forward when they pose an unacceptable level of
environmental damage or unduly sacrifice other important values found
on federal lands.
S. 140 does not deal with this subject. S. 796 addresses it in a
couple of ways. The first is in Section 307, which would require the
Secretaries of the Interior and Agriculture (acting through the local
BLM or U.S. Forest Service land manager), within three years of
enactment, to review certain lands under their jurisdiction and decide
whether to remove them from operation of the Mining Law, subject to
valid existing rights. This section also allows the federal land
managers (on their own motion or upon direction from the Secretary
after petition by a State Governor, Tribal head, or appropriate local
governmental official) to propose to their respective Secretary, and
the Secretary to decide whether, to amend applicable land use plans to
remove land from the operation of the Mining Law.
Federal land managers have long used their planning processes to
make basic decisions about what uses are appropriate on what areas of
federal lands. Yet here, as elsewhere, the hardrock mining industry has
been given special protection; specifically, a requirement that the
land managers use a special and cumbersome process for removing federal
lands from operation of the Mining Law. Federal Land Policy &
Management Act, 43 U.S.C. Sec. 1712(e)(3)).
Section 307 would substantially repeal the current prohibition
against using the ordinary land use planning authority to remove lands
from operation of the Mining Law. This is consistent with the general
thrust of Mining Law reform--to end the special treatment of the
hardrock mining industry on our nation's public lands, and make it
subject to the same regime as all other users of those lands.
The second way S. 796 addresses the control of environmental damage
is through the other provisions in its Title III. In general, these are
important steps in improving and making more consistent and predictable
the federal government's regulation of hardrock mining on its lands.
The hardrock mining industry argues that the government already has
sufficient authority to protect the environment and other values of the
federal lands from hardrock mining operations. But it also wants any
reform of the Mining Law to make clear that the government is powerless
to turn down a proposed mining plan of operations even if the mine
threatened environmental disaster by, say, permanently contaminating
aquifers containing immensely valuable future drinking water supplies,
and/or obliterating immensely valuable cultural sites, and/or
permanently rendering unusable many thousands of acres of land
immensely valuable for other uses.
History makes clear beyond peradventure that hardrock mining is a
dirty business, and that such environmental disasters are not only
possible but have often happened. When things can go bad in hardrock
mining operations, the costs to repair the damage can be enormous,
reaching hundreds of millions of dollars at a single mine site, and
sometimes requiring perpetual water treatment. Cumulatively, well over
a century of experience with the Mining Law of 1872 has saddled the
Nation's taxpayers with a cleanup cost for thousands of abandoned mines
that, according to some estimates, approaches fifty billion dollars.
Despite the fact that modern laws like the Clean Water Act apply to
some extent to hardrock mining, environmentally disastrous mines still
fall through the regulatory gaps. To take just one example of several
that could be cited, Montana and U.S. taxpayers are today paying many
millions of dollars to clean up the Zortman-Landusky mine--a mine which
was approved with all the modern laws in place that the industry still
argues are adequate and do not need changing.
Because existing standards and practices have not proved adequate
to control hardrock mining to the extent necessary to protect the
environment and other users of the federal lands, Mining Law reform
legislation needs to improve the situation. It is also important that
Congress legislate here to end the ``ping-pong game'' of succeeding
executive administrations changing the rules. As this Committee knows,
early on, the George W. Bush Administration weakened the so-called Part
3809 regulations governing hardrock mining on BLM lands, removing or
watering down some key provisions that had been added in the Clinton
Administration. Compare 65 Fed. Reg. 69,998 (2000) with 66 Fed. Reg.
54,837 (2001). Perhaps the most important change was to eliminate the
federal government's explicit authority to disapprove proposed hardrock
mines on federal lands if they threatened devastating, uncontrollable
harm on other important natural and cultural resources.
The Bush Administration acted on the basis of a Solicitor's Opinion
issued by my successor, which overruled an opinion I had issued as
Solicitor in 1999. These dueling legal opinions differed on how to
interpret a key phrase in FLPMA, in which Congress expressly amended
the Mining Law to require the Interior Secretary to protect the public
lands from ``unnecessary or undue degradation'' (emphasis added). 43
U.S.C. Sec. 1732(b). My legal opinion was that ``or'' means ``or,'' so
that BLM has a responsibility to regulate hardrock mining on the public
lands to protect against ``undue'' degradation, even if that
degradation is regarded as ``necessary'' to mining. My successor's
legal opinion was that ``or'' is better understood as meaning ``and.''
Thus, in his view, BLM has no authority to prevent hardrock mining that
causes ``undue'' degradation if such degradation is ``necessary'' to
mining.
Environmental groups asked a federal court to settle this dispute.
After full briefing, the court ruled that my reading of FLPMA was
correct. Mineral Policy Center v. Norton, 292 F. Supp. 2d 30 (D.D.C.
2003). Strangely, the court went on to decide not to set aside the Bush
Administration's removal of that express authority from the Part 3809
regulations. Conceding the question was ``indeed extremely close,'' the
court was persuaded by the Department of Justice's argument that--even
conceding that the Bush Administration's Solicitor was wrong on the
law--those regulations need not articulate that authority in so many
words. Neither side appealed this ruling.
S. 796 would reaffirm the ``unnecessary or undue degradation''
standard and, because the last word on its meaning was rendered by the
federal court in the Mineral Policy Center case, its view of that
standard should control.
Section 306(c) of S. 796 makes clear that, like the BLM, the U.S.
Forest Service is also to operate under this standard. This is
appropriate because some large hardrock mines sprawl across both
agencies' lands, and because the Forest Service continues to interpret
its governing authority narrowly. This perhaps should not be a
surprise, for the Forest Service was long reluctant to regulate
hardrock mining on its lands at all. Congress gave it express authority
to do so way back in 1897 (see 16 U.S.C. Sec. Sec. 478, 551), but the
agency did nothing to exercise it for more than three-quarters of a
century.
The regulations the Forest Service finally adopted in 1974 (36
C.F.R. Part 228) were relatively tepid and have changed little since,
despite vast ensuing changes in hardrock mining technology and
practices. They require mining operations to ``minimize,'' ``where
feasible,'' environmental impacts on national forest resources, 36
C.F.R. Sec. 228.8, and to take ``practicable'' measures to ``maintain
and protect fisheries and wildlife habitat which may be affected by the
operations.'' Id. at 228.8(e). In other words, the Forest Service has
taken the position that the government cannot turn down a proposal to
locate a hardrock mine on national forest lands even if it threatens
dire environmental harm. The courts have generally deferred to the
Forest Service's decisions, refusing, for example, to require it to
select the most environmentally preferable approach, even when doing so
preserves the profitability of the proposed mining operation. Okanogan
Highlands Alliance v. Williams, 236 F.3d 468 (9th Cir. 2000).
In resisting the kind of environmental regulatory authority that is
routinely applied to other federal lands users, the hardrock industry
sometimes tries to draw a distinction between standards to protect
``the environment'' and standards to protect other land resource
values. This distinction is not only very hard to draw in practice, but
is not particularly useful in this context. Environmental standards are
imposed to protect other resource values. For example, the government
controls air and water pollution in part to protect viewsheds and
wildlife habitat found on federal lands.
Every decision a federal land manager makes to allow a particular
use of public lands ought to consider the impact of that use on other
uses and values. If the impact is unacceptably large, the proposed use
ought to be prohibited. The law routinely holds every other user of the
public lands--oil or coal company, forest products company, electric
utility, rancher, hunter, angler, or hiker--to that common-sense
standard. Hardrock mining, which has the potential to cause more
serious disruption than practically any of these others, deserves no
special exemption from it.
conclusion
I applaud your taking up this important issue of public policy, and
I stand ready to advance this effort any way I can.

Senator Udall. Thank you, Mr. Leshy. Ms. Robin Nazzaro is
here. She is the Director of the Natural Resources and
Environment arm of the Government Accountability Office.
Welcome. We look forward to your testimony.

STATEMENT OF ROBIN M. NAZZARO, DIRECTOR, NATURAL RESOURCES AND
ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE

Ms. Nazzaro. Thank you, Mr. Chairman and members of the
committee. I'm pleased to be here today to discuss GAO's work
on royalties the States charge and the number of abandoned hard
rock mine sites and associated hazards--issues that are central
to the debate on reforming the Mining Law of 1872.
The vast majority of Federal lands where hard rock mining
operations occur are in the 12 Western States. These States
have statutes governing hard rock mining operations on lands in
their States. However, unlike the Federal Government, all 12
States assess royalties that allow them to share in the
proceeds from hard rock minerals extracted from State-owned
lands.
In addition, each of these States except Oregon, assesses
taxes such as severance taxes, mine license taxes or resource
excise taxes on the hard rock mining operations on private,
State and Federal lands. I will use the term ``functional
royalty'' to refer to these taxes that function like a royalty
in that they permit the State to share in the value of the
mine's production. Although States may use similar names for
the royalties they assess, there can be wide variations in
their forms and rates.
The royalties the States assess often differ depending on
land ownership. For example, for private mining operations
conducted on Federal, State or private land. Arizona assesses a
functional royalty of 1.25 percent of net revenue on gold
mining operations and an additional royalty of at least 2
percent of gross value for gold mining operations on State
lands.
In addition 9 of the 12 States assess different types of
royalties for different types of minerals. Wyoming, for
example, employs three different functional royalties for all
lands: net smelter returns for uranium, a difference in net
smelter return for trona, and a gross revenue for all other
minerals.
The royalties the States assess also differ in the
allowable exclusions, deductions and limitations. For example,
in Colorado, a functional royalty on metallic mining excludes
gross income below $19 million, whereas in Montana a functional
royalty on metallic mining is applied on all mining operations
after the first $250,000 of revenue. The actual amount assessed
for a particular mine may also depend on other factors, such as
the minerals processing requirements, mineral markets, mine
efficiency and the mine's location relative to markets.
To estimate the number of abandoned mines, we consulted
with mining experts at the National Association of Abandoned
Mine Land programs, the Interstate Mining Compact Commission,
and the Colorado Department of Natural Resources to develop a
standard definition. What we had found in looking at past
studies was that there was no standard definition and the
estimates were all over the board. We defined an abandoned hard
rock mine site as a site that includes all associated
facilities, structures, improvements, and disturbances at a
distinct location associated with activities to support a past
operation which could include prospecting, exploration,
uncovering, drilling, discovery, mine development, excavation,
extraction, or processing of mineral deposits locatable under
the general mining laws.
Using this consistent definition the 12 Western States, as
well as South Dakota, reported the number of hard rock mine
sites in their States. From this information we calculated a
total of at least 161,000 abandoned hard rock mine sites in
these States on private, State and local lands, excuse me,
Federal lands. These sites have at least 332,000 features that
may pose physical safety hazards such as open shafts or
unstable or decayed mine structures and at least 33,000 sites
have degraded the environment by, for example, contaminating
surface water and ground water or leaving arsenic-contaminated
tailings piles.
In conclusion, since 1979, GAO has reported on the need to
reform the General Mining Act of 1872. Assessing a royalty on
hard rock minerals could ensure that the public is compensated
for hard rock minerals extracted from Federal lands, as more
recently enacted laws require for oil, gas and other minerals
as well as provide funds to address the abandoned mines and
associated hazards.
Mr. Chairman, this concludes my prepared statement.
[The prepared statement of Ms. Nazzaro follows:]
Prepared Statement of Robin M. Nazzaro, Director, Natural Resources and
Environment, Government Accountability Office
Hardrock Mining.--Information on State Royalties and the Number of
Abandoned Mine Sites and Hazards
why gao did this study
The General Mining Act of 1872 helped open the West by allowing
individuals to obtain exclusive rights to mine billions of dollars
worth of gold, silver, and other hardrock (locatable) minerals from
federal lands without having to pay a federal royalty. However, western
states charge royalties so that they share in the proceeds from the
hardrock minerals extracted from their lands. For years, some mining
operators abandoned land used in their mining operations, creating
environmental and physical safety hazards. To curb further growth in
the number of abandoned hardrock mines on federal lands, in 1981, the
Department of the Interior's Bureau of Land Management (BLM) began
requiring mining operators to reclaim BLM land disturbed by these
operations.
what gao recommends
This testimony focuses on the (1) royalties states charge and (2)
number of abandoned hardrock mine sites and hazards. It presents
information from two GAO reports: Hardrock Mining: Information on
Abandoned Mines and Value and Coverage of Financial Assurances on BLM
Land, GAO-08-574T (Mar. 12, 2008) and Hardrock Mining: Information on
State Royalties and Trends in Imports and Exports, GAO-08-849R (July
21, 2008). GAO, among other steps, reviewed state statutes and
regulations on royalties on hardrock mining operations and asked 12
western states and South Dakota to provide information on the number of
abandoned mine sites and associated features in their states using a
consistent definition.
what gao found
Twelve western states that GAO reviewed assess royalties on
hardrock mining operations on state lands. The 12 western states are
Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, New
Mexico, Oregon, Utah, Washington, and Wyoming. In addition, each of
these states, except Oregon, assesses taxes that function like a
royalty, which GAO refers to as functional royalties, on the hardrock
mining operations on private, state, and federal lands. The royalties
the states assess often differ depending on land ownership and the
mineral being extracted. For example, for private mining operations
conducted on federal, state, or private land, Arizona assesses a
functional royalty of 1.25 percent of net revenue on gold mining
operations, and an additional royalty of at least 2 percent of gross
value for gold mining operations on state lands. The actual amount
assessed for a particular mine may depend not only on the type of
royalty, its rate, and exclusions, but also on other factors, such as
the mine's location relative to markets.
To estimate abandoned hardrock mine sites in the 12 western states
and South Dakota, we developed a standard definition for these mine
sites and asked the states to report the number of mine sites and
estimate the number of features at these sites that pose physical
safety hazards and the number of sites with environmental degradation.
Using this definition that GAO provided, states reported that there are
at least 161,000 abandoned hardrock mine sites in their states, and
these sites have at least 332,000 features that may pose physical
safety hazards and at least 33,000 sites that have degraded the
environment.
Mr. Chairman and Members of the Committee: I am pleased to be here
today to discuss our 2008 work on state royalties on hardrock minerals
and the number of abandoned hardrock sites and hazards-two issues that
are central to the debate on reforming the General Mining Act of
1872.\1\
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\1\ GAO, Hardrock Mining: Information on State Royalties and Trends
in Mineral Import and Exports, GAO-08-849R (Washington, D.C.: July 21,
2008); and GAO, Hardrock Mining: Information on Abandoned Mines and
Value and Coverage of Financial Assurances on BLM Land, GAO-08-574T
(Washington, D.C.: Mar. 12, 2008). We also testified on these issues in
2009; see GAO, Hardrock Mining: Information on Types of State
Royalties, Number of Abandoned Mines, and Financial Assurances on BLM
Land, GAO-09-429T (Washington, D.C.: Feb. 26, 2009)
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As you know, since the passage of the General Mining Act of 1872,
mine operators have extracted billions of dollars worth of silver,
gold, copper, and other hardrock (locatable) minerals from federal
lands without having to pay a royalty.\2\ Most of these lands are
managed by the Department of the Interior's Bureau of Land Management
(BLM) and the U.S. Department of Agriculture's Forest Service.
Assessing a royalty on hardrock minerals could compensate the public
for hardrock minerals extracted from federal lands, as more recently
enacted laws require for oil, gas, and other minerals.
---------------------------------------------------------------------------
\2\ Under U.S. mining laws, minerals are classified as locatable,
leasable, or saleable. Locatable minerals include those minerals that
are not leasable or saleable, for example, copper, lead, zinc,
magnesium, gold, silver, and uranium. Only locatable minerals continue
to be ``claimed'' under the Mining Act. For the purposes of this
report, we use the term ``hardrock minerals'' as a synonym for
``locatable minerals.'' Leasable minerals include, for example, oil,
gas, and coal. The Mineral Leasing Act of 1920, 41 Stat. 437 (codified
at 30 U.S.C. Sec. 181) created a leasing system for coal, gas, oil and
other fuels, and chemical minerals. Saleable minerals include, for
example, common sand, stone, and gravel. In 1955, the Multiple Use
Mining Act of 1955, 69 Stat. 367 (codified at 30 U.S.C. Sec. 601)
removed common varieties of sand, stone, and gravel from development
under the Mining Act.
---------------------------------------------------------------------------
The vast majority of the federal lands where hardrock mining
operations occur are in 12 western states.\3\ These western states have
statutes governing hardrock mining operations on lands in their state.
However, unlike the federal government, these states charge royalties
that allow them to share in the proceeds from hardrock minerals
extracted from state-owned lands. In addition, most of these states
charge taxes, such as severance taxes, mine license taxes, or resource
excise taxes, on hardrock mining operations that occur on private,
state, and federal lands. For the purposes of this report, we use the
term ``functional royalty'' to refer to taxes that function like a
royalty in that they permit the state to share in the value of the
mine's production. Although states may use similar names for the
functional royalties they assess, there can be wide variations in their
forms and rates.
---------------------------------------------------------------------------
\3\ The 12 western states are Alaska, Arizona, California,
Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington,
and Wyoming.
---------------------------------------------------------------------------
In addition to the lack of a requirement for hardrock mining
operators to pay royalties, prior to 1981, BLM did not require them to
reclaim the federal land they used. Consequently, hardrock mining
operators have left thousands of acres of federal land disturbed
through mineral exploration, mining, and mineral processing. Some of
these disturbed abandoned mine lands pose serious environmental and
physical safety hazards. These hazards include environmental hazards
such as toxic or acidic water that contaminates soil and groundwater or
physical safety hazards such as open or concealed shafts, unstable or
decayed mine structures, or explosives. Cleanup costs for these
abandoned mines vary by type and size of the operation.\4\
---------------------------------------------------------------------------
\4\ For purposes of this testimony, cleanup refers to the
mitigation of environmental impacts at mine sites, such as contaminated
water, and the reclamation of land disturbed by hardrock operations.
---------------------------------------------------------------------------
My testimony today focuses on the (1) royalties states currently
charge on hardrock mining operations and (2) number of abandoned
hardrock mine sites and number of associated hazards.
To address these objectives, we interviewed staff at BLM and the
Forest Service; examined agency documents and data; and reviewed
relevant legislation and regulations. To identify the types of
royalties, including functional royalties, that the 12 western states
assess on hardrock mining operations, we reviewed state statutes and
regulations, as of March 2008, pertaining to royalties on hardrock
mining operations. To aid in understanding general patterns in state
royalties, we consulted academic and industry sources and then we
categorized each royalty according to how it is assessed. To assess the
number of abandoned hardrock mine sites, we asked the 12 western states
and South Dakota\5\-which have significant numbers of abandoned
hardrock mining operations-to determine the number of these mine sites
in their states. We asked the states to use a consistent definition,
which we provided, in estimating the number of abandoned mine sites and
associated features that pose a significant hazard to public health and
safety and the number of sites that cause environmental degradation.\6\
We specified that states should only include hardrock (also known as
locatable), non-coal sites in this estimate. From these data, we
estimated the number of features that pose physical safety hazards and
the number of sites with environmental hazards in the 12 western states
and South Dakota. We also summarized six selected studies by federal
agencies and organizations to document differences in estimates,
definitions, and methodologies. This testimony is based on prior GAO
reports whose work was conducted in accordance with generally accepted
government auditing standards.\7\
---------------------------------------------------------------------------
\5\ South Dakota was included because it has a significant number
of abandoned hardrock mines and has been included in previous studies
estimating the number of abandoned hardrock mines.
\6\ We defined an abandoned hardrock mine site as all associated
facilities, structures, improvements, and disturbances at a distinct
location associated with activities to support a past operation under
the general mining laws.
\7\ GAO-09-429T, GAO-08-849R, and GAO-08-574T.
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the 12 western states assess multiple types of royalties, with
differences in types and rates based on the mineral extracted and land
ownership
Twelve western states assess royalties on the hardrock mining
operations on state lands. In addition, each of these states, except
Oregon, assesses taxes that function like a royalty, which we refer to
as functional royalties, on the hardrock mining operations on private,
state, and federal lands. To aid in the understanding of royalties,
including functional royalties, the royalties are grouped as follows:

Unit-based is typically assessed as a dollar rate per
quantity or weight of mineral produced or extracted, and does
not allow for deductions of mining costs.
Gross revenue is typically assessed as a percentage of the
value of the mineral extracted and does not allow for
deductions of mining costs.
Net smelter returns is assessed as a percentage of the value
of the mineral, but with deductions allowed for costs
associated with transporting and processing the mineral
(typically referred to as mill, smelter, or treatment costs);
however, costs associated with extracting the mineral are not
deductible.
Net proceeds is assessed as a percentage of the net proceeds
(or net profit) of the sale of the mineral with deductions for
a broad set of mining costs. The particular deductions allowed
vary widely from state to state, but may include extraction
costs, processing costs, transportation costs, and
administrative costs, such as for capital, marketing, and
insurance.\8\
---------------------------------------------------------------------------
\8\ For a full discussion of the definition and formula for each
type of royalty, see GAO-08-849R.

Royalties, including functional royalties, often differ depending
on land ownership and the mineral being extracted, as the following
---------------------------------------------------------------------------
illustrates:

For private mining operations conducted on federal, state,
or private lands, Arizona assesses a net proceeds functional
royalty of 1.25 percent on gold mining operations, and an
additional gross revenue royalty of at least 2 percent for gold
mining operations on state lands.
Nine of the 12 states assess different types of royalties
for different types of minerals. For example, Wyoming employs
three different functional royalties for all lands: (1) net
smelter returns for uranium, (2) a different net smelter
returns for trona-a mineral used in the production of glass,
and (3) gross revenue for all other minerals.

Furthermore, the royalties the states assess often differ in the
allowable exclusions, deductions, and limitations. For example, in
Colorado, a functional royalty on metallic mining excludes gross
incomes below $19 million,\9\ whereas in Montana a functional royalty
on metallic mining is applied on all mining operations after the first
$250,000 of revenue.\10\ Finally, the actual amount assessed for a
particular mine may depend not only on the type of royalty, its rate,
and exclusions, but also on such factors as the mineral's processing
requirements, mineral markets, mine efficiency, and mine location
relative to markets, among other factors.
---------------------------------------------------------------------------
\9\ Under Colorado tax laws, gross income is the value of ore
immediately after its removal from the mine and does not include any
value added subsequent to mining by any treatment processes.
\10\ That is, the Montana royalty is assessed on the gross value of
product, less first $250,000. Gross value is the receipts received from
the sale of concentrates or metals extracted from mines or recovered
from the smelting, milling, reduction, or treatment of such ores.
Receipts received is defined as the payment received, less allowable
deductions.
---------------------------------------------------------------------------
Appendix I* contains information on royalties the 12 western states
assess on hardrock mining operations, with details on rates, royalty
type, and deductions and limitations.
---------------------------------------------------------------------------
* All appendixes and tables have been retained in committee files.
---------------------------------------------------------------------------
using a consistent definition, states reported at least 161,000
abandoned hardrock mine sites, with many posing hazards
To estimate abandoned hardrock mine sites in the 12 western states
and South Dakota, we developed a standard definition for these mine
sites.\11\ In developing this definition, we consulted with mining
experts at the National Association of Abandoned Mine Land Programs;
the Interstate Mining Compact Commission; and the Colorado Department
of Natural Resources, Division of Reclamation, Mining and Safety,
Office of Active and Inactive Mines. We defined an abandoned hardrock
mine site as a site that includes all associated facilities,
structures, improvements, and disturbances at a distinct location
associated with activities to support a past operation, including
prospecting, exploration, uncovering, drilling, discovery, mine
development, excavation, extraction, or processing of mineral deposits
locatable under the general mining laws. We also asked the states to
estimate the number of features at these sites that pose physical
safety hazards and the number of sites with environmental degradation.
---------------------------------------------------------------------------
\11\ It has been difficult to determine the number of abandoned
hardrock mine sites from existing studies in part because there is no
standard definition for a hardrock mine site. For example, six studies
we reviewed relied on different definitions, and estimates varied
widely from study to study. For a full discussion of these six studies,
see GAO-08-574T, app. III.
---------------------------------------------------------------------------
Using this definition, states reported to us the number of
abandoned sites on all lands in their states and we calculated a total
of at least 161,000 abandoned hardrock mine sites in their states. At
these sites, on the basis of state data, we estimated that at least
332,000 features may pose physical safety hazards, such as open shafts
or unstable or decayed mine structures. Furthermore, we estimated that
at least 33,000 sites have degraded the environment, by, for example,
contaminating surface and ground water or leaving arsenic-contaminated
tailings piles.\12\ Table 1 shows our estimate of the number of
abandoned hardrock mine sites in the 12 western states and South
Dakota, the number of features that pose significant public health and
safety hazards, and the number of sites with environmental degradation.
---------------------------------------------------------------------------
\12\ Tailings are a combination of fluid and rock materials that
are left behind after the minerals are extracted. Tailings are often
disposed of in a nearby pile.
---------------------------------------------------------------------------
Regarding federal lands, BLM and the Forest Service have had
difficulty determining the number of abandoned hardrock mines on the
lands they manage. In September 2007, the agencies reported an
estimated 100,000 abandoned mine sites,\13\ but we found problems with
this estimate. For example, the Forest Service had reported that it had
approximately 39,000 abandoned hardrock mine sites on its lands.
However, this estimate includes a substantial number of non-hardrock
mines, such as coal mines, and sites that are not on Forest Service
land. At our request, the Forest Service provided a revised estimate of
the number of abandoned hardrock mine sites on its lands, excluding
coal or other non-hardrock sites. According to this estimate, the
Forest Service may have about 29,000 abandoned hardrock mine sites on
its lands. That said, we still have concerns about the accuracy of the
Forest Service's recent estimate because it identified a large number
of sites with ``undetermined'' ownership, and therefore these sites may
not all be on Forest Service lands.
---------------------------------------------------------------------------
\13\ BLM and Forest Service, Abandoned Mine Lands: A Decade of
Progress Reclaiming Hardrock Mines (September 2007).
---------------------------------------------------------------------------
BLM has also acknowledged that its estimate of abandoned hardrock
mine sites on its lands may not be accurate because it includes sites
on its lands that are of unknown or mixed ownership (state, private,
and federal) and a few coal sites. In addition, BLM officials said that
the agency's field offices used a variety of methods to identify sites
in the early 1980s, and the extent and quality of these efforts varied
greatly. For example, they estimated that only about 20 percent of BLM
land has been surveyed in Arizona. Furthermore, BLM officials said that
the agency focuses more on identifying sites closer to human habitation
and recreational areas than on identifying more remote sites, such as
in the desert. Table 2 shows the Forest Service's and BLM's most recent
available estimates of abandoned mine sites on their lands.
Mr. Chairman, this concludes my prepared statement. I would be
happy to respond to any questions that you or Members of the Committee
may have.

Senator Udall. Thank you, Ms. Nazzaro. Next we turn to
Cathy Carlson. A fellow Coloradan who is the Senior Policy
Advisor of Earthworks based in Boulder, Colorado.
Ms. Carlson.

STATEMENT OF CATHY CARLSON, POLICY ADVISOR, EARTHWORKS,
BOULDER, CO

Ms. Carlson. Good morning, Mr. Chairman. I'd don't think
I've ever called you that before.
Senator Udall. Good morning.
Ms. Carlson. Senator Risch, Senator Shaheen, it's very nice
to be here this morning. Thank you for allowing me an
opportunity to come and talk about why I believe it's time to
reform the Mining Law of 1872.
Earthworks is a national conservation organization
dedicated to protecting communities and the environment from
the adverse effects of mineral development both here in the
United States and overseas. We've worked closely with the House
and Senate Committees over the past two decades to draw
attention to the ongoing damage that is occurring from hard
rock mining on Federal lands. We're pleased to see the
chairman's leadership in bringing this issue before the
committee. We encourage the members of the committee to now
take up reform and act upon it.
In the face of global warming we'll have less water in our
streams and rivers in the region. That means less water for
municipal and agricultural purposes and less water for fish and
wildlife which support a robust recreation economy in the West.
At the same time our water quality is at risk from mining.
In Colorado increased interest in uranium development in
the Delores River watershed has alarmed the local government
there. The prospect of another molybdenum project polluting the
watershed above the town of Crested Butte has local citizens
and community leaders very concerned as well. I'd like to
recognize Alan Bernholtz, the Mayor of Crested Butte, who was
here in the audience today.
Mayor Bernholtz testified before this committee last year
and really offered his first hand experience on the threats at
Western communities like the Town of Crested Butte have that
are being caused by the Mining Law of 1872. Even the city of
Boise is concerned that it cannot protect its drinking water
supply because of the Mining Law of 1872. You may be concerned
about this as well, Senator Risch.
It's not just the water supplies that are threatened. One
of the flagships of the National Park System is the Grand
Canyon National Park. It's now threatened by new speculative
claims for uranium mines.
This kind of mineral activity could damage the resources
that the park was created to protect. There's also concern
about the potential impacts of the whole Colorado River system.
In fact the metropolitan water district of Los Angeles has
expressed its concern about the potential for uranium mining
near the park to pollute the river system as one of the
recipients of the water downstream.
Congress needs to address the concerns of these local
communities and protect these iconic landscapes. S. 796
introduced by Chairman Bingaman will help these communities
balance mineral development while maintaining tourism and the
clean air and water for all its citizens. I recommend that the
bill be revised to ban hard rock mines on Federal lands that
create a permanent source of pollution.
In this age of increasing water scarcity why in the world
would Congress agree to open a spigot of polluted water and
allow it to run in perpetuity across the public lands? Acid
mine drainage or toxic pollution from uranium mines threatens
our health. They threaten our livelihoods and our rural
communities.
Very few mines have this problem, but when they do, do we
really want them as a permanent liability on our Federal lands?
They kill fish, poison ground water supplies. New Mexico
adopted this policy in 1993 with the passage of its Surface
Mining Act and a similar protection should be considered at the
Federal level.
Both S. 796 and S. 140 introduced by Senator Feinstein will
create economic opportunities for rural communities throughout
the United States. These bills create jobs for backhoe
operators, engineers, water specialists, consultants in the
restoration of abandoned mines. According to a recent report by
the State of Montana every million dollars spent on abandoned
mine restoration creates 65 jobs. These are good paying jobs in
rural that suffer the boom and bust of a mineral economy and
having a dedicated source of funding as considered in S. 796
would help communities ride out the bust cycle with restoration
work funded by the abandoned mine program created and funded
with these legislative proposals.
The Congressional Budget Office reviewed the mining reform
legislation passed by the House of Representatives in 1993 and
again in 2007 and concluded that the bills would result in a
net increase in jobs. We need these jobs and the revenue stream
to support them to clean up these old mines. The estimates of
the amount of funding that's needed for abandoned hard rock
mining range from $35-70,000,000,000.
We already know what the benefits are like from having a
program for coal mine abandoned mine clean up. Many of the
States represented on this committee have benefited greatly
from the creation of a coal abandoned mine program and none
more so than the State of Wyoming. But Alaska, California,
Washington, Utah, Colorado, New Mexico, Kentucky, Tennessee,
each of these States can point to the value of having revenues
to address the safety and environmental damage caused by
abandoned coal mining. Let's see if we can find a way to create
a similar program for hard rock mining in the United States as
well.
We can learn from this experience. Build a hard rock mining
restoration program. We can put people to work in rural
communities.
We should also learn from the history of the coal abandoned
mine program and make sure that these funds are dedicated for
the purpose of abandoned mine clean up. So that was the
proposal that's set forth specifically in S. 796. I just want
you to remember these bills are about creating jobs and
economic opportunities in communities that deal with the boom
and bust of mineral development.
S. 796 with a few changes can protect our critical water
supplies, iconic landscapes and communities that have developed
their own economies beyond mining. Let's move this legislation
this year. Thank you.
[The prepared statement of Ms. Carlson follows:]
Prepared Statement of Cathy Carlson, Policy Advisor, EARTHWORKS,
Boulder, CO
Thank you Mr. Chairman and Members of the Committee for the
opportunity to speak to you today about the importance of reforming the
Mining Law of 1872. I have been working to update this century old
statute for over 20 years, and I am pleased to see the Chairman's
leadership in introducing legislation and conducting this hearing.
EARTHWORKS is a national conservation organization dedicated to
protecting communities and the environment from destructive mineral
development, here in the United States and internationally. We work
closely with broad coalitions of local government, Native Americans,
citizen groups and other conservation organizations to improve the
policies governing hard rock mining and oil and gas development.
Reforming the Mining Law has been a priority for our organization
since it was created in 1987. We have had some success in effectively
eliminating the patenting of federal lands through the annual
appropriations process, and this policy should now be made permanent.
We also worked with this Committee to remove oil shale from the
jurisdiction of the Mining Law. All energy minerals, such as coal, oil,
oil shale and uranium, should be managed under the Mineral Leasing Act.
Uranium is the only energy mineral still subject to the Mining Law.
Now is the time to update the overall mining policies governing
hardrock minerals on federal lands, and we urge you to include the
following principles:

1. Eliminate patenting of federal lands
2. Establish a royalty for mineral production and a fee for
use of federal lands for mineral activities
3. Enable land managers to deny mining activities on federal
lands where conflicts exist with other resource values.
4. Adopt comprehensive reclamation requirements for all
mining, with particular consider to protecting water resources
that could be polluted by mining
5. Ensure that a financial assurance is in place and adequate
to cover the costs of reclaiming mines
6. Create an abandoned mine program with adequate funding to
begin to address the backlog of public safety and pollution
from these old mines while creating jobs and economic
development opportunities in the region.

S. 796, the Hardrock Mining and Reclamation Act of 2009, addresses
many of these reforms. I suggest a few changes to the bill and it
should be adopted by the Committee with those amendments. S. 140, the
Abandoned Mine Reclamation Act of 2009 also represents an important
step forward in mining reform. If the Committee is unable to reach
agreement on a broader package of reforms, I encourage it to move S.
140, but EARTHWORKS prefers to see a more comprehensive approach to
mining reform, such as S. 796.
the need for mining law reform
Communities across the West are dealing with the potentially
destructive impacts of mineral development on federal lands.
This Committee heard last year about the challenges that the Town
of Crested Butte and Gunnison County, Colorado were experiencing as
they balance their robust tourism economy with the threat of mineral
activity in their watershed. There is a new molybdenum mine proposed
above the Town of Crested Butte that could result in a permanent source
of pollution into the Town's drinking water supply. Some of the federal
land was patented under the Mining Law about a decade ago, over the
Town's objections. Now, it is unclear whether federal land managers
have the authority to deny a mining operation on that portion of the
project that will be on federal lands, even if the Town's drinking
water source is threatened.
The Native American community in the southwestern United States is
rallying to protect Mt. Taylor, a sacred site in New Mexico. Previous
uranium development left behind a legacy of radioactive waste and
groundwater contamination for the Pueblo communities. Now there is
interest in a new uranium mining operation on Mt. Taylor that the
Native Americans believe would destroy this important cultural treasure
on federal lands. The local community is working to create a
designation for this area to recognize its cultural value under state
law, because there is no mechanism to protect this important cultural
resource under the Mining Law of 1872.
In Arizona, there is substantial local opposition to the
development of a new copper project in the Santa Rita Mountains south
of Tucson. According to mining company executives, the Forest Service
cannot deny the mining operation because the Mining Law of 1872 does
not give the land manager the authority to say no to mining.
In Idaho, the City of Boise expressed concern about the prospect of
a new gold mine above the City that would be located in their drinking
water supply. The City deserves the right to protect its drinking
water, which is such a critical resource in the West. However, the
federal land managers don't recognize their authority to balance
mineral activities with the demands for clean drinking water, because
of the Mining Law of 1872.
Some of our most precious natural lands are also at risk.
Literally hundreds of new claims have been staked in the past few
years near Grand Canyon National Park, which is one of the hallmarks of
the National Park System and sees over 5 million visitors annually. The
prospect of uranium development has raised concern from Park officials
and the Metropolitan Water District of Los Angeles, which would receive
the tainted waters if the uranium development pollutes the Colorado
River. Congress responded in 2008 with an emergency withdrawal of the
land around Grand Canyon National Park, but no action has been taken.
Under the Mining Law, uranium development could take place across this
landscape, threatening the resources within the Park.
A new silver mine is also being considered under the Cabinet
Mountain Wilderness Area in Montana. This area is home to grizzly bears
and was set aside by Congress for its outstanding natural values. There
is no mechanism to protect the Wilderness Area under the Mining Law.
These are just a few examples of why we need to update this law. We
need to be able to give communities the ability to balance the demand
for minerals with the long-term needs of their citizens. We also need
to protect critical drinking water supplies and our outstanding natural
areas in the West.
key provisions in s. 796
S. 796, the Hardrock Mining and Reclamation Act, represents a
significant step forward in managing mineral resources on federal lands
in the West.
S. 796 would create a process to look at the most valuable federal
lands in the West and determine whether mineral activities should occur
there. Currently, mineral activities can take place in wilderness study
areas, on lands of critical environmental concern and along wild and
scenic river corridors. There are also mining activities proposed near
National Conservation System units such as the Grand Canyon National
Park, which should be evaluated to determine if mining is an
appropriate use of federal land in that area.
S. 796 would update our financial assurance or reclamation bonding
policy for mineral activities that take place on federal lands. In the
past ``bust'' cycles of this boom and bust industry, American taxpayers
had to foot the bill for clean up of dozens of mine sites that were
left unreclaimed after the mining companies declared bankruptcy in
Colorado, Montana, South Dakota and Nevada. We need to protect the
public from further liability in the event a company cannot meet its
environmental obligations.
This bill would establish a comprehensive program for permitting
and enforcement of mineral activities. Under existing law, the
enforcement authority of federal land managers to protect other
resource values on federal lands is limited. S. 796 would eliminate
loopholes that allow small scale but potentially highly destructive
activities to occur on federal lands without a permit. The Forest
Service currently allows operations of 5 acres or less to operate on
federal lands without a permit and with little oversight and management
of these operations.
S. 796 falls short in its consideration of the water-related
impacts of mining. The bill would require companies to avoid the
creation of acid mine drainage to the extent practicable, but clearly
allows mineral activities to be approved that could pollute federal
water supplies and the drinking water of downstream communities. The
bill provides for long-term financial assurances to cover the costs of
water treatment, but Congress should go further and deny mining
operations that will become permanent sources of pollution on federal
lands in the West.
S. 796 should also be strengthened to clarify the role of the
federal land management agency in balancing the demands for minerals
against other uses. Communities, mineral companies and the public all
witnessed the divergent interpretations of ``undue or unnecessary''
degradation by changing Administrations and the courts in the past
several years. If the Secretary of the Interior and the Secretary of
Agriculture are given clear authority to protect other public values in
the prevention of ``undue or unnecessary degradation,'' as the bill
suggests, that authority should be explicit.
Finally, we note that the definition of National Conservation
System Units varies in different statutes. We suggest that the
definition of a National Conservation System Unit in the Hardrock
Mining and Reclamation Act include National Wilderness Areas, which
would be consistent with the definition from Alaska National Interest
Lands Conservation Act, or ANILCA.
mining law reform creates economic opportunity
S. 796, and S. 140 will have an immediate impact in the West in the
creation of jobs and economic opportunity on rural lands. The western
United States is littered with abandoned mines. Many of these mine
sites generate acid mine drainage and other pollutants that degrade
water resources. According to the Environmental Protection Agency,
abandoned hardrock mines pollute roughly 40 % of the headwaters of the
streams and rivers in the West.
There is no comprehensive inventory of the extent of the abandoned
mine problem in the West. The U.S. Geological Survey produced some
estimates and several states have also estimated the number of mine
sites, ``features'' and openings, which are summarized in the table
below and on the map on the following page. Each mine may contain
multiple ``features'' or ``openings.''

TABLE 1. WESTERN STATE INVENTORY OF ABANDONED HARDROCK MINE SITES Arizona Estimated 100,000
``openings''
California Estimated 47,000 mines
Colorado 23,000 mines, including coal
sites
Idaho 8,800 mines
Montana 6,000 mines inventoried
Nevada Estimated 200,000--500,000
mine
``features'' at 166,000 mines
New Mexico Estimated 15,000 mines
Oregon 140 mines inventoried
South Dakota 900 mines in the Black Hills
area
Utah 20,000 mine features,
including coal
Washington 3,800 mines inventoried
S. 796 and S. 140 would create, for the first time, a comprehensive
abandoned mine restoration program for hardrock minerals in the West.
This program will create jobs for local citizens in rural communities
to clean up abandoned sites. Once restored, these lands increase in
value and provide an economic boost for the local economy.
Congress already recognized the economic value of abandoned mine
restoration in the economic stimulus funding that was appropriated
earlier this year. As part of that bill, the Bureau of Land Management
and Forest Service all received funding for hardrock abandoned mine
restoration. Here are just a few examples of the work that is underway
with these funds:

BLM is investing in the clean up at the Helen Mine in the
Mayacmas Mining District, located in northern Napa and southern
Lake Counties, California. The state found high levels of
mercury contaminating the water at this site, and California
Office of Health Hazard Assessment issued a fish advisory
warning due to the mercury contamination in the fish
population. Restoration efforts will start this year to
remediate the water pollution associated with this mine.
The Crystal Hill Mining District is located near La Garita
in the San Luis Valley in Colorado. BLM identified the need to
establish closures at these mines at least 5 years ago. With
stimulus funding, these safety hazards will be addressed this
year.
The Rip Van Winkle mine is located in the Merrimac Mining
District near Elko Nevada. It was identified by the BLM as a
priority for restoration because of the acid mine drainage
discharging from the site into Maggie Creek and potentially
reaching the Humboldt River. The site characterization work has
been completed for this site and now the reclamation work can
proceed this year.

The 2009-2010 funding for abandoned mine restoration as part of the
economic stimulus is very helpful to start restoration efforts, but it
is just the tip of the iceberg. Abandoned mine restoration is estimated
to cost $50 BILLION.
The reclamation funding generated by this legislation could amount
to substantial funding for abandoned mine clean up in the West. Senator
Bingaman's bill includes a land use fee, a royalty on new mineral
production and a reclamation fee to generate revenues for this program.
S. 140 would also establish a royalty for new and existing mines and a
reclamation fee on mineral production.
The U.S. Geological Survey estimates minerals commodities
production each year in its mineral commodity summaries. S. 796 and S.
140 both include a reclamation fee of at least 0.3 percent of the
mineral production value to fund an abandoned mine program. Using U.S.
Geological Survey data, EARTHWORKS estimate that a reclamation fee of
0.3 percent would generate about $50 million annually, minus
processing, beneficiation and transportation costs (which can be
discounted in the Bingaman bill).
There is no definitive estimate of the benefit of a royalty from
federal lands, because the amount of federal land production is
unknown. EARTHWORKS' best guess is that about 10% of the overall metals
production comes from federal lands. A royalty of 4 percent for
existing mines, which is included in the Feinstein bill, could generate
another $60 million in revenue for abandoned mine restoration. Senator
Bingaman's bill takes a more modest approach, and would establish a
royalty only for new mining operations. This approach would not
generate any revenue in the near future, until new mines on federal
lands are approved and brought into production.
Based on the 2006 review of environmental impact statements
prepared by Jim Kuipers and Ann Maest, EARTHWORKS estimates that at
least 70,000 acres of mineral activities are permitted on federal lands
in the West. The land use fee would be established that charges mining
companies $500 for each 20 acres of federal land in the permit area.
This land use fee could generate $1.75 million for abandoned mine
restoration.
The claim maintenance fee is also increased in S. 796, and would be
$10/claim higher than the current fee charged by the Department of the
Interior. EARTHWORKS anticipates that these funds would be used
primarily to cover the costs of administering the program.
According to a State of Montana study of abandoned mines, each
million dollars spent will create 65 jobs. Many of these jobs are good,
high paying jobs that could offset some of the layoffs occurring around
the industry due to the current economic climate.
The restoration activity would also take degraded lands and put
them into productive use. This will benefit local communities and the
private landowners who have abandoned mines on their property.
S. 796 would establish the revenues for abandoned mine restoration
and ensure that these revenues are available on a continuous basis and
not subject to annual appropriations. Given the problems associated
with the coal abandoned mine fund and its unobligated balances, the
Committee is wise not to repeat the mistakes made in the coal program
and ensure that the funding is actually used for hardrock abandoned
mine restoration.
its time to act
EARTHWORKS appreciates Senator Bingaman's leadership in bringing
the debate over mining reform to the Senate Energy and Natural
Resources Committee. We also applaud Senator Feinstein's continued
interest in finding revenues to help create jobs and economic
prosperity in old mining communities that are plagued with abandoned
mines. We encourage the Committee to move forward on mining reform
legislation and approve a bill in Committee.

[Photos have been retained in committee files.]

Senator Udall. Thank you, Ms. Carlson. I'm going to turn to
Senator Risch to introduce our last witness, Mr. Baker.
Senator Risch.
Senator Risch. I'm going to introduce Mr. Baker. But before
I do that, Ms. Carlson I would caution against using the
example of Boise being afraid that it can't protect its water
supply. The issue you're referring to is a mine that was
proposed up at the headwaters of the Boise River.
In the city of Boise, we get most of our drinking water
from wells, but we do get some out of the Boise River. An
environmental group that was wanting to stop this was using
this exaggerated argument to put fear in the hearts of Boisians
that they shouldn't allow this mine because it would pollute
the river. As Governor of this State I assured people that we
have a very active Environmental Protection Agency. We have a
very active State Department of Environmental Quality.
Regardless of the Mining Act of 1872 or any other law, we
are not going to allow the Boise River to be polluted by any
mine legally permitted or not legally permitted.
Notwithstanding any other provisions of law, the Boise River--
you can go into the city, into downtown where it runs through
the heart of the city, take a cup and drink the water. It's
going to continue to stay that way. I think Idahoans are going
to protect it. So----
Mr. Baker, welcome. Mr. Baker is CEO of Hecla Mining. For
those of you who don't know Idaho has an area called the Silver
Valley.
The Silver Valley, up until about 30 years ago, produced
more silver than anywhere else in the world. It has a number of
very large mines with works that go a mile below ground. Those
mines were operated by miners who made $60-$80,000 a year and
sometimes more working on contract and incentive basis.
As a result of that it was an area that had very good
economic development, and a very high quality of life.
Unfortunately, obviously people found they could hire people in
other countries at a couple dollars a day to mine the silver,
which is quite a bit different than the $80 to $100,000 a year
that these miners were making. As a result very few of those
mines are left operating. In fact, I think probably the Lucky
Friday is the only one that is operating. Am I right on that?
Mr. Baker. Galena. The Galena is still operating.
Senator Risch. Still operating? But in any event Mr.
Baker's company has been active for many, many years in that
area. They have been a great corporate citizen in Idaho. They
have provided great jobs and a lot of the economics that have
driven the State over the years.
Idaho has on its seal a miner which was one of the groups
that actually settled the State. We became a State in 1890, 18
years after the Mining Law of 1872 was enacted. We have a long
history with mining.
We do have a number of abandoned mines. They do attract
people who go into the back country or wherever. They seem to
be attracted to the--and they have a lot of interest in the
history and the workings that are still there and still
visible. So we have a lot of that in Idaho.
I look forward to, as I think everyone does, revamping the
law of 1872 with a mind that we need to keep safety in mind
first. Obviously the environment is very important. But while
we do clean up, and while we do rehabilitation, we also have to
keep in mind that the mining industry is extremely important to
the people of America from a national security standpoint, and
from an economic standpoint.
Everything in this room, everything on the person of
everybody in this room was either grown or taken out of the
land. We need to keep in mind that we need a healthy mining
industry, while at the same time, we need to see that it's
done, that we don't some of the catastrophes that we've had in
the past in the mining.
So with that, Mr. Baker, welcome. We are interested in
hearing your views on revamping the 1872 law.

STATEMENT OF PHILLIPS BAKER, JR., PRESIDENT AND CEO, HECLA
MINING COMPANY, REPRESENTING NATIONAL MINING ASSOCIATION, COEUR
D'ALENE, ID

Mr. Baker. Thank you, Senator Risch. Thank you, Mr.
Chairman for having me here. I am Phil Baker. I am the CEO of
Hecla Mining Company. But I'm here testifying on behalf of the
National Mining Association.
Hecla Mining Company started in 1891. We've survived
depressions. We've provided critical minerals for two World
Wars.
But we've also evolved into a technologically advanced,
environmentally responsible company built on union labor. We
are the Nation's largest producer of silver, second largest
producer of zinc and third largest producer of lead. I think
Hecla provides a good bell weather for mining reform.
Now the mining industry supports modernizing the Mining Law
to give fair returns to the United States while providing a
predictable, legal and regulatory framework that attracts
mineral investment, keeps those high paying mining jobs and
provide resources for America. My written testimony covers the
role mining has had in creating jobs particularly in rural
America where mines are the core industry of a community. Thus
it details our extreme dependence on foreign metal production.
One example is the United States filing a WTO action
against China just last month for withholding critical minerals
to the United States With only 7 percent of worldwide
exploration going to the United States there will be a growing
reliance on foreign production if we don't take action.
Currently we have 100 percent net import reliance on 18
important minerals.
However, Mr. Chairman, I'm going to focus this oral
testimony on royalties and fees and the impact on mines. The
NMA supports a net profits type royalty of production payment
because of industry profitability and the nature of how mines
work. No other royalty structure such as a gross royalty or a
net smelter return will work for our industry. Let me explain
why.
In front of me you add to the light some silver from our
Lucky Friday mine in Idaho. In the middle that ore was reduced
to a concentrate that's going to be sent to a smelter and then
to your left, the finished product a Mercury dime. Now the dime
and the concentrate both have 2.5 grams worth of silver we'd
need a lot more ore to have 2.5 grams of raw silver ore.
At the Lucky Friday it costs us 50 percent of the value of
that silver to extract the ore. Another 10 percent to crush it,
grind it, process it into concentrate. Then the overhead for
our mine is another 30 percent of the cost.
So in the concentrate, but that material in the middle is
shipped to a smelter. Ninety percent of the silver's value has
already been spent. This leaves very little profit margin. The
mine relies upon by products in order to be viable.
So how does this relate to various royalties? A gross
royalty taxes the value of the silver ore, the rock to your
right, ignoring the cost that it takes to get it to the
surface. The net smelter return royalty or the NSR applies to
the concentrate detecting only smelter and transporting costs.
The net profit royalty includes the cost of the final
product, silver to taking it to market. In hard rock mining it
is very expensive to get even a teeny fraction of the initial
tonnage into a product that's saleable. A gross or even a net
smelter return royalty is inconsistent with the nature of our
business.
I'll use this Greens Creek mine, the largest private
employer in Juneau to explain the impact of these three royalty
structures. Greens Creek is the world's fifth largest silver
mine and usually the lowest cost mine. So in Greens Creek if
it's hurt by the royalty structure the negative impact on less
robust mines is going to be magnified.
Greens Creek is subject to a net profits tax in Alaska
resulting in a payment of 10 percent of our total pretax cash-
flow since inception. This has been a win-win for Alaska and
Greens Creek because early in the mine's life a very little
cash-flow was generated, but about 300 jobs were created that
pay almost three times the local average. Let's contrast
Alaska's net profit approach with S. 140's, 4 percent gross tax
that would have taken 50 percent of the pretax cash-flow and
almost 100 percent of our pretax cash-flow at the 8 percent
level.
A gross royalty is a punitive tax that would close the
mine. If the intent of S. 796 is an NSR, Greens Creek could not
operate. At 2.3 percent NSR, the bills minimum rate 20 percent
of the pretax cash would be paid and over half the cash-flow at
the bills higher rate, the 6-percent rate. So both the gross
royalty and the NSR would likely have caused the closure of a
mine which is expected to operate a minimum of 35 years.
Mr. Chairman, I want to thank you for the opportunity for
input on this bill and royalties in particular. I'll stop my
presentation here.
[The prepared statement of Mr. Baker follows:]
Prepared Statement of Phillips Baker, Jr., President and CEO, Hecla
Mining Company, Representing National Mining Association, Coeur
d'Alene, ID
s. 796 and s. 140
My name is Phil Baker, President and CEO of Hecla Mining Company. I
am testifying today on behalf of the National Mining Association (NMA).
NMA appreciates the opportunity to testify before this committee on
amending the mining law, which if not crafted with great foresight,
will not only negatively impact the domestic mining industry, but also
the economy and national security of the United States for many
decades. I say this because the proposed changes will put an end to
growth of a viable domestic mining industry, an industry that creates
high paying jobs with good benefits and provides resources critical to
national security. Mining also will play a pivotal role in America's
transition to renewable energy as we produce needed resources.
The current law has been in effect for 137 years. What Congress
does to change that law will have a lasting and far reaching impact, so
I encourage the broadest and most thoughtful reflection as you move
forward. Hecla,-established in 1891 in northern Idaho's Silver Valley-
just 19 years after enactment of the Mining Law-is a particularly
compelling example of the positive, long-term impact that hard rock
mining has on the economy. We also tell the dramatic story of how
mining has evolved into what it is today-a highly regulated,
technologically advanced, and environmentally responsible industry. We
are the oldest precious metals mining company in North America; the
largest producer of silver in the U.S; second largest producer of zinc;
and third largest producer of lead. We have operations and properties
in four states all of which are represented on this committee--Alaska,
Idaho, Colorado, and Washington.
For 118 years, Hecla has operated in more than twelve states from
the east coast to the west. We operate on private property and on
patented and unpatented claims on public lands. As a company, we
operate with an environmental culture that is ingrained from the
corporate level to individual site workers. We have invested millions
of dollars in state-of-the-art environmental protection, remediation,
and reclamation. We have won awards for this effort, including the 2007
Northwest Mining Association Excellence in Reclamation Award for
Idaho's Grouse Creek Mining Project and the 2004 Nevada Governor's
Excellence in Mining Award for the Rosebud Mining Project.
NMA has vast expertise and is the principal representative of the
producers of most of America's coal, metals, industrial and
agricultural minerals; the manufacturers of mining and mineral
processing machinery, equipment and supplies; and the engineering and
consulting firms, financial institutions and other firms that serve our
nation's mining companies.
The testimony that I bring is one of proactive change. NMA, Hecla,
and all U.S. mining companies are here to encourage dialogue on the
modernization of the existing mining law. We recognize that aspects of
the existing system need to be changed to provide a fair return to the
public from mining on public lands. There have been proposals for
amending or ``reforming'' the mining law for many of the past twenty
years. As we look at a world of increasing competition for minerals and
metals needed to sustain economic growth and transition to a renewable
and clean technology future, now is the time for thoughtful and
reasonable amendments that will provide that fair return while
preserving critically important land tenure rights provided by the
current law.
Any changes to current mining law must focus on promoting and
keeping mining jobs in the U.S. and diminishing the nation's reliance
on foreign minerals while effectively protecting the environment and
bringing fair return to the American public. Mining was one of the
first industries to outsource jobs overseas as increasing exploration
dollars and mine development moved to countries which embraced the
economic and social benefits that come with mining development in a
community. This reform needs to reverse the current trend of
exploration, the first step in developing mines, from continuing to
move outside the U.S. Today only 8 percent of all worldwide exploration
dollars are spent in the U.S., which means fewer mines are developed.
This paltry level of exploration investment will continue to increase
our reliance on foreign minerals, which will continue to negatively
impact the domestic economy and national security. As we become even
more dependent on foreign countries for mineral resources, fewer jobs
will be created in the U.S., less tax revenue will be generated and the
infrastructure and security of our country will be threatened,
including the military, renewable energy infrastructure, and even our
everyday lives.
mining generates great american jobs
With more than 50,000 direct family-wage jobs with numerous
benefits, including health care, that pay on average one-third higher
than the U.S. industrial average and the ability to generate as many as
four additional jobs elsewhere in the economy, U.S. mining provides
more than vital resources for America-it can help rebuild America
during these tough economic times. Minerals provide essential resources
that modern society cannot live without. Minerals are the building
blocks for every aspect of American commerce, including defense
equipment, transportation systems, construction, telecommunications,
electronics, medical research, renewable energy infrastructure and new
energy technologies. The U.S. produces only half of the minerals that
this nation uses in manufacturing. However, the more than $25 billion
in metal mining products generates nearly $60 billion in economic
output. More than $43 billion in nonmetallic mining generates more than
$100 billion in economic output. Imagine the economic benefits if we
produced all of our needed resources.
On a regional level in Alaska and Idaho, two key states where Hecla
operates, mining plays a major role in the economies of rural
communities as well as the states themselves. These two states have a
total population of just more than 2.2 million people with about
684,000 in Alaska and 1.53 million in Idaho, which is less than 1
percent of the total population of the US. Both states have widely
dispersed rural communities where high paying jobs with good benefits
would otherwise be non-existent were it not for mining. These mining
jobs also provide health, hospitalization and dental care insurance,
achieving a fundamental goal the President has set for all Americans.
In Alaska, there are 3,500 jobs with a payroll of $245 million
directly related to the many facets of mining from exploration to
development of active mines. The impacts of the industry reach far into
the economy with another 2,000 indirect jobs and payroll of $105
million. From 1981 until 2004 more than $3.0 billion has been invested
in exploration and mine development. State and local governments also
reap the benefits of this industry. In Alaska, $105 million was paid to
the state in royalties, user fees and tax revenue. Local municipalities
and regional governments received $15.6 million, and Alaska Native
Corporations received $212 million.
In Idaho in 2007, over 4,900 Idaho residents were directly employed
by the mining and processing industry, which directly accounts for $250
million in direct wages. These workers produced $817 million of mineral
value. The total direct impact of mining was $665 million and indirect
impact was $542 million for a total impact from mining on Idaho economy
of $1.2 billion. Direct and secondary economic activity generated a
total of $88 million to state and local governments through taxes,
royalties and fees.
Obviously, a healthy and vibrant domestic mining industry can make
valuable contributions to the United States' economy as a whole. But
for rural western communities, mining often is the mainstay of the
local economy. Take, for example, Juneau, Alaska where Hecla's Greens
Creek Mine is located. Juneau, the capital of Alaska, is a remote
community with limited high paying job opportunities. Greens Creek is
the largest private sector employer in Juneau.
Hecla's Greens Creek Mine, Juneau, Alaska:
Employs an average of 308 personnel;
Pays an average salary of $92,000 which is almost triple the
local average of $35,000 in Juneau;
Has a total annual payroll of $28.3 million;
Supports 210 indirect jobs in Juneau with annual payroll of
$5.3 million;
Supports 318 indirect jobs state wide with annual payroll of
$7.7 million;
Spends $43 million statewide for vendor goods and services;
Pays $1.5 million to the City and Borough of Juneau in real
property, business property and sales tax;
Contributes $50,000 annually to charitable organizations;
and
Pays employees for several hundred hours of volunteer time.
Greens Creek Mine employees:
Pay $430,000 in property taxes;
Provide Juneau School District with 192 students, which
accounts for $664,000 in state funding;
Donate more than $15,000 personal dollars to charity; and
Donate greater than 4,000 volunteer hours to charity,
schools and community.
In the community, a household opinion survey showed that:
78 percent think that Greens Creek has a positive impact on
the community;
83 percent think that mining is important to Juneau's
economy; and
64 percent feel that Greens Creek does a good job of
protecting the environment while 27 percent said that they
don't know. Only 9percent were negative.

In rural Shoshone County, Idaho where Hecla has operated since
1891, there are similar economic and social impacts.
Hecla's Lucky Friday Mine in rural Shoshone County, Idaho:
Employs an average of 271 personnel;
Pays an average salary of $64,575 which is more than double
the local average of $27,000 in Shoshone County;
Has a total annual payroll of $17.5 million;
Provides 1 in 10 jobs in rural Shoshone County;
Supports indirect employment of 378 personnel; o Pays $11.6
million locally in vendor supplied good and services;
Pays $3.8 million real property, business property and sales
tax;
Contributes $75,000 annually to charitable organizations;
and
Pays employees for several hundred hours of volunteer time.
Lucky Friday Mine employees:
Are active volunteers in community and school organizations;
Provide the local school district with 175 students which
accounts for about $615,000 in state funding; and
Are active volunteers with local emergency response teams.
Creede Project in Mineral County, Colorado:
Hecla has an extensive exploration project in this historic mining
district in Mineral County, located at the head of the San Luis Valley,
which includes one of the poorest areas in Colorado. If the project
comes to fruition, Hecla will bring high paying jobs with good benefits
to an isolated community, as well a positive impact on local economies
in the San Luis Valley of southern Colorado and northern and central
New Mexico. Local impact includes goods and services from local
suppliers as well as those in larger cities such as Albuquerque.
silver, a strategic metal
As president of the largest silver producing company in the U.S.,
let me use silver as an example of the critical role minerals play in
our society to promote our way of life and our national and economic
security. How could our society function without silver? Silver, our
trademark metal, is a compelling example of a strategic metal for which
we reliant on foreign sources.
Silver, a unique metal, has the highest thermal and electrical
conductivities and highest reflectivity of all metals. Silver is
indispensible for all renewable energy technology. Solar photovoltaic
cells rely on silver for efficient collection and concentration of
electrical current. Hybrid cars and wind turbines also require silver
for efficient electrical transmission.
Silver, the king of electronics, is the standard for electrical
conductivity against which all metals are compared. You hold silver in
your hand every day, but on a grander scale, silver will play a vital
role in updating our inefficient 100 year old national electric grid
infrastructure.

Uses of Silver--Silver is a Critical Component of:

Household electrical outlet: silver is a critical component
for the outlets and your appliances to work;
Common household appliances: microwaves, dishwashers,
televisions, computers;
Water purifiers: silver helps rid drinking water of
bacteria, chlorine, lead and particulates;
Energy saving windows: windows treated with silver reflect
away almost 95 percent of the sun's rays;
Batteries: especially small, lightweight batteries needed to
power watches, cameras and other small electronic devices like
cell phones and iPods;
The strongest cast aluminum alloy known--used to protect C17
fighter jets and Apache helicopters;
Solar panels: More than 90 percent require silver; and
Medical advances: Silver nitrate has anti-bacterial
properties that make operating rooms and hospitals safer.

The US is 60 percent import reliant on silver. How can that be?
According to the U.S. Geological Survey, the United States is in the
top five countries with significant silver reserves and resources. In
2008, approximately 1,120 tons of silver, with an estimated value of
$570 million was produced in the US. Alaska continued as the leading
producer state followed by Nevada. Silver has critically important
uses, and the United States has significant resources that are not
being mined. Amendments to the Mining Law should focus on ways to
reduce dependence on imported silver and many other mineral
commodities.
Silver is a metal that helps protect our armed forces and national
security, potentially saves lives, and enhances our daily lives. Why do
we rely on politically unstable countries to provide that-or any
other--strategic metal?
The answer may partially be in the Behre Dolbear report 2009
Ranking of Countries for Mining Investment: Where ``not to invest'',
which is attached for the record. The report ranks the United States 5
out of 10 on the basis of the tax regime, citing the 35% corporate tax
income tax as one of the highest in the world. In addition, the report
also cites state levies and concerns of Congressional actions imposing
additional mining specific taxes (royalties). With regard to permitting
delays, the U.S ranks a 2 of 10 citing the lengthy 5 to 7 year period
required before mine development can commence. The report notes that
many companies prefer to take the risk of operating in a more
politically unstable country, where mines can be brought on line in 18
months rather deal with the arduous and expensive five to seven year
permitting process in the United States.
america's ability to provide needed resources
The U.S. can and should be more self-reliant for the minerals we
need. Despite known reserves of 78 important mined minerals, the United
States currently attracts only eight percent of worldwide exploration
dollars. As a result, our nation is becoming more dependent upon
foreign sources to meet our metal and minerals requirements, even for
minerals with adequate domestic resources.
The U.S. Geological Survey has documented that America now depends
on imports for 100 percent of 18 minerals commodities. In addition, the
U.S. is more than 50 percent import reliant on another 43 commodities.
This increased import dependency makes our country vulnerable in
troubling political times and is not in our national interest.
Increased import dependency causes a multitude of negative
consequences, including aggravation of the U.S. balance of payments,
unpredictable price fluctuations, loss of high paying jobs and
vulnerability to possible supply disruptions due to political or
military instability.
For example the metals and minerals used in hybrid cars, wind
turbines and solar panels have high net import reliance, while the U.S.
has unmined domestic reserves. The net import reliance of some of those
important metals is as follows:

Aluminum 100%
Rare earths 100%
Platinum 91%
Cobalt 81%
Zinc 73%
Silver 60%
Titanium 54%
Copper 32%

These statistics raise important questions about where the Nation
obtains strategic minerals. For example:

Should we create jobs and obtain rare earths from an
environmentally responsible mine in California or rely on China
for this strategic metal?
Should create jobs and obtain cobalt from an environmentally
responsible mine in Idaho or rely on politically unstable
Congo, Tibet, or Siberia for this strategic metal?

Our import reliance crisis was brought to the forefront when
President Obama filed a complaint with the World Trade Organization
accusing China of limiting exports of raw materials such as bauxite and
zinc, which are critical for production of steel, aluminum and other
products. By withholding these raw materials, China creates unfair
preference for their own industries.
A July 2009 U.S. News and World Report article, which is attached
for the record, speaks directly to the U.S. import reliance for metals.
We are 100% dependent on China for rare earth metals, even though there
are known deposits in California and Idaho. China recognizes the
critical importance of rare earth minerals which are considered ``the
backbone of the Information Age'' and in many applications there is no
substitute. China has aggressively purchased control of mines in Brazil
and Australia and is working to make control world supplies of rare
earth metals. Their dominance goes back to a carefully thought out plan
from 1992 with the mantra ``The Middle East has Oil; we have rare
earths.'' Currently China controls more than 90% of the world's rare
earths.
The U.S. News and World Report notes that since 2002 Chinese
exports of rare earth metals have dropped from 60,000 tons to an
expected 2009 export of +30,000 tons. A 2008 Australian analyst, Dudley
Kingsnorth, predicted that by 2012 China will retain all rare earth
metals for their domestic consumption, effectively cutting off the
world from this critical commodity while global demand continues to
grow.
Meanwhile American industry and American consumers retain a myopic
vision of the supply chain and do not understand that the loss of
critical minerals, the fundamental construction materials, will send
more American industries to the countries that produce necessary raw
materials. Will this signal an end for American industries which
require rare earth minerals for their products? Will we be buying all
of our wind turbines, solar panels, hybrid cars, electronics and other
durable goods from China?
Our over-reliance on foreign supplies is exacerbated by competition
from surging economies such as China and India. As these countries
continue to evolve and emerge into the global economy, their
consumption rates for mineral resources are rapidly increasing; they
are growing their economies by using the same mineral resources that we
need to build and maintain our economy. As a result, there exists a
much more competitive market for global mineral resources.
just how profitable is american mining?
There is a misconception that hardrock mining, especially precious
metals, is enormously profitable. Many equate the value of minerals
extracted from the ground with actual profits of mining companies;
however, that is far from the truth. Mining company profits are
influenced by a number of cyclical factors, most notably the value of
the commodity being mined.
Unlike durable goods industries, which can increase the price of
their products to compensate for increased costs of raw materials,
energy, and labor, world markets dictate the price of metals while the
mining company must still struggle with the increased costs to operate.
In other words, a copper mining company cannot unilaterally decide to
sell its copper at $4.00 per pound when the spot rate is $1.60 per
pound.Just what does it take in time and capital investment to develop
a mine in the United States? I'll use an example of a hypothetical mine
similar in size to Lucky Friday or Greens Creek. Larger mines
potentially could have double or triple costs and longer time to bring
the mine to production. The following are the steps and costs to find
and develop a mine in the U.S.:

Grass roots exploration and drilling to define mineral
deposit

--Multiple years of sampling and drilling
--$5 million per year for drilling

Calculate reserves and develop Plan of Operations

--2 to 4 years
--Up to $3 million per year

Submit Plan of Operations to Agencies and begin
Environmental Impact Statement

--5 to 8 years
--Develop EIS and submit for public comment
--Review public comment and respond
--Appeals period
--Record of decision
--Entire permitting process
--Cost over 5 to 8 years $10 million

Actual Mine Development

--Construction 2 to 3 years depending on type and size of operation
--Development costs in excess of $250 million

Total time and Costs before any ore is mined

--Time up to 15 years
--Total costs in excess of $300 million including such large
capital investment items as:

--Ore processing mill $25-50 million
--Underground access shaft $250 million

At this point a company has already invested more than $250 million
on a project that could become non-economic should the commodity price
drop soon after production begins. After the mine goes into production,
daily operating costs including fuel, power, labor, maintenance,
chemical, etc. quickly impact profits.
In addition to operating costs at the mine, a company will have
other costs related to support facilities, on and off-site exploration,
development, depreciation, environmental compliance and a host of other
items. All the while commodity prices fluctuate on a daily basis while
the company is trying to recoup its initial investment which may take
another 5 to 6 years. In short, a modern mining company needs to be
prepared to invest several hundred million dollars for up to 20 years
before the initial investment is recovered.
nma supports net profit royalty for fair return to public
NMA supports a fair return to the public through imposition of a
royalty. The ``key is to achieve a royalty that most mines can bear and
still make reasonable profits.'' (Oct. 2, 2007, testimony of James Otto
before the House Natural Resources Committee, attached for the record.)
Since the imposition of a royalty has the potential to have significant
economic consequences on existing and future mining operations, the
type of royalty, the rate and its application to existing claims are
all critical variables that must be considered. An 8 percent gross or
Net Smelter Return (NSR) royalty, such as that contained in S140 does
not properly balance a fair return to the public and the need to
encourage the private investment required to develop mining operations
and provide the resources needed by our economy. As described in a
previous section, mining operations require long-term and substantial
commitments of capital and years of development before investors
realize positive cash flows. A royalty rate, that is the highest
government-imposed rate in the world, will obviously impact return on
investment, our ability to create good paying jobs here at home and our
ability to meet more of our own needs for minerals. As noted by the
World Bank:

A mining country that relies on private firms to find and
exploit its mineral resources must compete with other countries
for investment. Its investment climate, which reflects how
attractive the country is to domestic and foreign investors,
depends ultimately on two considerations: first, the expected
rate of return the country offers investors on their
investments in domestic projects, and second, the level of risk
associated with those projects.
Otto, James et al., Mining Royalties: A Global Study of
Their impact on Investors, Government, and Civil Society. World
Bank, 2006, p. 183 (attached for the record).

The primary weakness of a gross or NSR royalty ``is that low profit
mines will have the same royalty basis as high profit mines, and this
may impact them with regard to decisions about mine life, ore cut-off
grade, and whether to continue operations when prices are low.'' (Oct.
2, 2007 Otto testimony) Because it is applied regardless of mine
profitability, a gross or NSR royalty fails to take into account the
cyclical and often volatile nature of commodity prices.
As demonstrated by extremes in highs and lows for commodity prices
over the last couple years, the prices of hard rock minerals have
historically been subject to great fluctuation. (See National Mining
Association--Five year overview of select commodity prices, attached
for the record.) The addition of a royalty can:

turn a profitable mine into valueless rock with a sudden
downturn in the market. Simply put, as commodity prices
decrease the rate of return required to justify a mining
investment increases more dramatically under a gross [or NSR]
royalty than under a net [profits] royalty. Because the other
costs of the mining operation are relatively fixed, the gross
[or NSR] royalty takes a bigger bite out of the shrinking
income pie as prices decrease.
Oct 2, 2007, testimony of James Cress before the House
Natural Resources Committee. (attached for the record)

A gross or NSR royalty would require a mining company to continue
paying a royalty even when it is operating at a loss, and that royalty
could even cause the loss. No mine can be operated long at a loss. The
result would be that some mines shut down prematurely, jobs would be
lost, federal state and local taxes would not be paid, and suppliers of
goods and services would suffer.
A net profit royalty, in contrast, does not cause mining operations
to operate at a loss. A net royalty automatically reduces during
periods of low prices and increases again when prices are higher,
permitting mining operations to weather periods of low commodity prices
and maximize the recovery of marginal ore during periods of high
prices. Due to the cyclical nature of demand for mineral commodities,
there have been and will always be periods of lower commodity prices. A
net profits royalty provides the best incentive to explore for minerals
on federal lands throughout economic cycles so that the nation's needs
can continue to be met.
Because the commodities affected by the proposed legislation are
sold on a world market, U.S. costs must be competitive to attract the
investment needed to promote domestic mining. Obviously, the royalty
will impact U.S. costs and, if not carefully crafted, will put U.S.
mining projects at a competitive disadvantage. A high gross or NSR
royalty ignores the fact that:

The United States corporate tax rate of 35% is virtually the
highest corporate tax rate in the world. This, combined with many high
state levies, provide a significant negative incentive for future
investments. Its major trading partners continue to lower their rates
putting American corporations in increasingly uncompetitive situations.
Behre Dolbear, 2009 ``Where Not to Invest.(attached)''

Because other extractive industries pay a royalty based on gross
value for the product does not mean that gross royalty is appropriate
for hardrock mining. In an article by Doug Silver When Ignorance Meets
Greed: Welcome to the New Mining Law, (attached for the record), the
author explains why the gross royalty imposed on coal mining will not
work for hard rock mining.

It is rumored that the 8% figure targeted by congressional
sponsors was likely derived from the royalty rate currently
paid on federal coal lands (8%--12% depending on the mining
method). After all, if the coal boys can pay it, why can't the
metal miners?
The answer is simple. In a coal mine, one mines massive
blocks of mineral, crushes them and perhaps washes the coal.
Then the coal is loaded and shipped to the utilities. In excess
of 75% of every ton mined is used in the finished product. It
should also be noted that coal processing (washing) and
associated transportation costs are allowed deductions in
determining the coal royalty value. The newly proposed royalty
rate for the Hardrock industry is based on gross income without
any deductions.
Metal mining is quite different from coal mining. Copper
mines can have grades of less than 0.5% per ton and gold mines
often grade less than 0.05 ounces gold per ton mined. They then
have to be beneficiated and often treated with special
chemicals or smelting to crack the minerals and liberate the
metal. This is an expensive process in which only a tiny
fraction of the initial tonnage produces a final salable
product. The economic differential between coal and metals
mines is enormous, but apparently Washington is unaware of
these commercial issues.

nma objectives for mining law reform
NMA is committed to the development of a fair, predictable and
efficient national minerals policy through amendments to the Mining Law
of 1872. Appropriate changes to the Mining Law provide an opportunity
to decrease our dependence on foreign minerals, promote job creation,
drive economic growth and transition to renewable energy. Appropriate
changes also will be developed within the existing and effective
federal and state environmental regulatory framework that already
governs minerals projects on public lands. Because of these existing
comprehensive and effective regulations, modern mining in the U.S. is a
worldwide model of environmental stewardship and reclamation
achievements.
Responsible amendment to the mining law should achieve the
following objectives:

Utilize a Net Income Production Payment or Net Profits
Royalty to Provide the Public Fair Compensation for Minerals
Produced from New Mining Claims on Federal Lands

--Production payment base should be net of operating costs--not a
gross or NSR royalty;
--A net production payment is a better incentive for investment
because it takes into consideration the costs to process
ore into a marketable product and does not penalize
operators during periods of low commodity prices;
--A net production payment should be structured to recognize that
most mining claims already are subject to an underlying
private royalty burden and that the combination of federal
and private royalties must not make mines unprofitable;
--The net production payment should not diminish the revenue from
state mineral taxes and severance taxes relied upon by
state and local governments; and
--The net production payment should take into consideration the
total tax contribution of mining companies so as not to
undermine investments in mine development.

Preserve the 30 U.S.C. Section 22 Rights of Self Initiation
and Entry

--Preserve the Mining Law rights of self initiation and entry at 30
U.S.C. Sec. 22 to enter and occupy public lands open to
prospecting and exploration for locatable minerals and
location of mining claims.

Provide for Secure Rights to Use and Occupy Federal Lands
for Mineral Purposes (Security of Tenure)

--Certainty regarding the ability to use and occupy the land
through the entire lifecycle of exploration, development,
mining and reclamation from the time of claim location
through mine reclamation is needed to attract private
investment in mining activities on federal lands; and
--Payment of the claims maintenance fee should be the sole
mechanism that secures all rights to use and occupy federal
lands for all mineral purposes throughout the entire life
cycle of the project, including uses reasonably incident
thereto pursuant to 30 U.S.C Sec. 612 (a) and (b), both
prior to and after discovery of a valuable mineral deposit.

Establish an Abandoned Mine Lands Clean-up Fund with the
Revenues Generated from a Net Income Production Payment

--Currently abandoned mine programs are funded through state
programs and congressional appropriations to federal and
state agencies;
--Funds should be coordinated with existing federal and state AML
funds and programs; and
--Good Samaritan liability protection is needed to encourage and
promote voluntary clean-ups.

Recognize that the Existing Comprehensive Framework of
Federal and State Environmental Laws Provides Comprehensive and
Effective Regulation of All Aspects of Mining from Exploration
through Mine Reclamation and Closure

--Mining is one of the most regulated industries in the U.S. with
numerous environmental laws and regulations, which are
administered by multiple federal, state and local agencies;
--The numerous federal and state environmental laws and regulations
that govern mining demand a high level of environmental
protection and require financial assurance to guarantee
reclamation;
--No new or different regulations, environmental performance
standards or financial assurance requirements are needed;
and
--According to a 1999 National Academy of Sciences report, Hardrock
Mining on Federal Lands this existing environmental
regulatory framework for mining is ``generally effective''
in protecting the environment. The discrete regulatory gaps
that were identified in this study have been filled.

Recognize that the Existing Authorities for Closing or
Declaring Unsuitable for Mining Those Federal Lands with Unique
Characteristics or of Special Interest

--New authorities for protecting special lands are unnecessary as
Congress has and continues to routinely use its ample
existing authority to establish wilderness areas, national
parks, wildlife refuges, recreation areas, and wild and
scenic rivers that close lands to mining;
--Congress also has granted additional authority to the Executive
Branch to close federal lands to mining. The Antiquities
Act authorizes the President to create national monuments
to protect landmarks and objects of historic and scientific
interest; and
--Furthermore, Congress authorized the Secretary of the Interior to
close federal lands to mining pursuant to the land
withdrawal authority of the Federal Land Policy and
Management Act.

The cornerstone of NMA's policy objectives is a predictable legal
and regulatory framework to provide the long-term certainty and
stability needed to protect existing investments and to attract new
capital necessary to maintain a healthy and sustainable domestic mining
industry. The importance of the domestic mining industry to our
economy, our renewable energy future, our way of life and our national
security cannot be ignored. Indeed, it is economically and
environmentally irresponsible for us to ignore the vast mineral
resources we have within our nation's boundaries when our domestic
needs are so great.
s. 796 and s. 140 fail to meet the needs of u.s. mining
NMA is aware that Chairman Jeff Bingaman (D-N.M.) introduced S. 796
to stimulate dialogue, and as such, NMA is committed to working with
the Chairman and the Senate Energy and Natural Resources Committee to
enact reasonable amendments to the Mining Law. In addition Senator
Dianne Feinstein has introduced S. 140 the ``Abandoned Mine Reclamation
Act of 2009''. NMA cannot support S. 796, the ``Hardrock Mining and
Reclamation Act of 2009'' or S. 140 the ``Abandoned Mine Reclamation
Act of 2009'' as currently written for two reasons. First, provisions
in the bills will increase our Nation's dependence on foreign minerals-
an outcome that will weaken our defense and compromise our agenda to
develop a renewable energy infrastructure and renewable sources of
energy. Secondly, S. 796 adds regulatory uncertainty that will
undermine U.S. competitiveness and threatens thousands of high-paying
mining jobs and countless mining-dependent communities. America's
families, communities and businesses cannot sustain higher energy
costs, additional job losses and further weakening of our economy
during these difficult times. However, NMA does support many of the
concepts in the royalty provisions of S. 796, particularly those
providing for deductions. But because of the shortcomings described
below, NMA is not able to give its full support.
Likewise, S. 140's 4 percent gross royalty on mines with current
commercial production and 8 percent gross on new mines will result in
premature closure of existing mines and make future mines uneconomic,
resulting in an unhealthy increased reliance on foreign sources of
minerals, a loss of high paying family-wage jobs, and bring severe
economic hardship on mining-dependent rural communities. Furthermore,
assessing the royalty on existing mining claims on which there has been
substantial investment in reliance on existing law may subject the
United States to substantial takings litigation.

Royalty Provisions of S. 796 Will Undermine Investment
Because They Are Not Defined Adequately and Leave Most Critical
Details to Future Rulemaking to Determine the Following:

--The exact amount of the royalty (a range of 2-5 percent to be
decided by the Secretary of the Interior through
regulations);
--The precise nature of deductions that are reasonably associated
with beneficiation, processing and transportation;
--The standard to be used to determine the royalty rate; and
--Whether the entity responsible for payment of the royalty is the
operator (which is the simplest way for the government to
administer) as opposed to owners, coowners or underlying
royalty owners.

The Reclamation Fee in S. 796 and S. 140 is Unnecessary in
Light of Other Fees imposed and Creates Uncertainty

--The reclamation fee is unnecessary, is an additional burden on
mining companies that does not take into consideration the
total tax contribution of mining companies, and will
undermine investments in mine development.
--The reclamation fee would apply to production on nonfederal as
well as federal lands
--As in the case of the royalty, there is no standard for the
Secretary in determining the percentage (between 0.3 and 1
percent); and
--There is no provision to credit the fee against the royalty.

S. 796 Fails to Clarify Rights to Provide Security Tenure
Needed to Attract Investment

--S. 796 fails to clearly preserve self initiation and entry rights
to go onto open public land and conduct mineral activities;
--S. 796 fails to replace the security that was provided by
patenting with explicit legislative language that grants
claimholders the right to use and occupy the land both
prior to and after discovery of a valuable mineral deposit
for all mineral activities authorized under the Mining Law
throughout the entire life of the project; and
--S. 796 and S. 140 do not establish that claimants have rights
against the United States and instead merely restate the
common law doctrine that claimholder has the right to keep
other claimants off his claim.

S. 796 Includes a New and Unnecessary Mechanism for Land
Withdrawals

--S. 796 gives local federal land managers the broad discretionary
authority to withdraw lands from the operation of the
mining law established under FLPMA Sec. 202(c), which does
not require an evaluation of mineral potential.
--S. 796 requires local federal land managers to conduct a complete
review of numerous areas with potential special resource
values-including more than 58.5 million acres in the 2000
Roadless Rule-for the purpose of identifying lands that
should be withdrawn from mineral entry.
--S. 796 authorizes withdrawals that do not have to comply with the
withdrawal procedures and congressional approvals required
by the Wilderness Act of 1964 and the Federal Land Policy
and Management Act (FLPMA).
--S. 796 has the potential to place substantial areas of mineral-
rich federal lands off limits to mining without evaluating
how these withdrawals will increase the Nation's dependency
on foreign minerals or adversely affect the economy and
America's transition to renewable energy sources and clean
technologies.

S. 796 Requires New Environmental Provisions That Will
Duplicate Existing Standards

--S. 796 directs the Secretaries of the Interior and Agriculture to
jointly promulgate new environmental and reclamation
standards for mineral activities on federal lands;
--The new regulations are duplicative of requirements already
applicable under FLPMA or the National Forest Management
Act; and
--There is no on-the-ground justification for creating a new
regulatory structure for hardrock mining. The 1999 National
Academy of Science study referenced above found the
existing regulations to be comprehensive and effective.

S. 796 Creates An Inefficient Permitting Scheme for
Exploration Activities

--The bill institutes an extensive new permitting scheme for
exploration activities, even those that would impact fewer
than five acres of land.
--S. 796 eliminates the current practical regulatory scheme for
initial exploration activities, such as road building and
exploration drilling that create less than 5 acres of
surface disturbance. These regulations currently provide
for an expeditious review and approval of proposed initial
exploration projects and require a reclamation bond to
guarantee that exploration-related surface disturbances be
fully reclaimed; and
--S. 796 creates a more cumbersome permitting process for
exploration activities, which will cause substantial delays
for companies resulting in a slower pace of discovery and
will place an increased administrative burden on surface
land managers.

S. 796 removes critical non-metallic commodities such as
uranium from ``locatable'' to ``leasable'' status

--Changing the status of uranium and other non-metallic minerals to
leasable commodities will effectively cripple these
industries.
--Uranium and other non metallic commodities should remain
locatable minerals because they require exploration and
development similar to metallic minerals;
--Discovery, delineation and development activities typically
require years of fact-finding including ground, aerial and
satellite reconnaissance; exploration drilling;
environmental baseline data gathering; workforce hiring and
training; mine and mill planning, design and construction;
decommissioning and decontamination.
--Uranium ore requires additional extensive and expensive
processing in the form of mining, crushing of the ore,
separation and concentration of the U3O8.
conclusion: mining creates jobs
Two of the current administration's major priorities can be
achieved with thoughtful modernization of the Mining Law: job creation
and increased use of renewable energy sources. First, job creation
related to mining will play a pivotal role in economy recovery. Second,
mining produces strategic metals necessary for transition to renewable
energy infrastructure for the United States. By keeping high paying
mining jobs at home and producing those strategic metals, the U.S. will
be positioned for a stable economic and renewable energy future. Just
as we are trying to escape the downward spiral related to dependence on
foreign oil, our goal, as a country, should also be to reduce
dependence on foreign countries for strategic metals.
Across the U.S., mining has had a profound economic impact with
generation of both direct and indirect jobs and economic output. In
just nine western states, there are more than 35,000 direct metal
mining jobs with a total payroll of more than $2.6 billion. That
equates to an average wage of more than $74,000 per year plus benefits.
The direct economic output in those 9 states is more than $17 billion.
That is only the frame on a much larger economic picture which is
composed of multiple indirect jobs, wages, tax revenues and social
benefits.
The impact of all aspects of mining from exploration through
production and reclamation ripples through the economy, especially in
rural communities. Tax revenue is generated at federal, state and local
levels. Indirect jobs are created. Schools benefit directly from
increased enrollment and funding as well as from the generosity of
mining companies in the area. Local communities develop stable
infrastructure because of a healthy tax base. Community organizations
that support arts, youth activities, senior citizens, recreation thrive
in mining economy-based rural communities. At a time when unemployment
is high and job creation is critical, mining can help drive a strong
recovery by keeping jobs at home.The United States needs a robust
minerals production industry to help meet the needs of American
consumers. The transition into green technology is 100% dependent on
the availability of critical minerals, many of which have known
reserves and can be mined in the United States. Unfortunately, America
is ceding to others the responsibility for meeting our minerals needs.
Increased import dependency created by lack of U.S. mineral development
is not in our national interest and causes a multitude of negative
consequences, including aggravation of the U.S. balance of payments,
unpredictable price fluctuations and vulnerability to possible supply
disruptions due to political or military instability. The U.S. mining
industry has fully embraced the responsibility to conduct its
operations in an environmentally and fiscally sound manner. It hopes
and expects that Mining Law legislation will recognize and honor both
this commitment and the industry's contribution to our national well-
being.
NMA appreciates the opportunity to provide this testimony.
attachments*
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* Attachments have been retained in committee files.
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Behre Dolbear Group, Inc., 2009, 2009 Ranking of Countries
for Mineral Investment: Where ``not to invest'', 17p
Burnell, James, March/April 2009, You Say Alternatives are
the Answer: let's talk, The Professional Geologist, page 33-37.
Cress, James, January 24, 2007, Full Committee hearing:
Oversight Hearing to receive Testimony on Reform of the Mining
Law of 1872, 15p.
Cress, James, October 2, 2007, House Subcommittee on Energy
and Natural Resources, Legislative hearing on H.R. 2262-
Royalties and Abandoned Mine Reclamation, 7p.
Garber, Kent, July 1, 2009, America's New Energy dependence:
China's Metals, U.S. News and World Report.
National Mining Association, 2009, 5-Year Metals Prices 2004-
2008 for Copper, Nickel, Molybdenum, and Zinc
Otto, James et al., Mining Royalties: A Global Study of Their
impact on Investors, Government, and Civil Society. World Bank,
2006, p. 183.
Otto, James, January 24, 2008, Senate Committee on Energy and
Natural Resources, Reform of the Mining Law of 1872 (royalty),
5p.
Silver, Doug, 2009, When Ignorance Meets Greed: Welcome to
the New Mining Law, SME.

Senator Udall. Thank you, Mr. Baker, thanks to the entire
panel for compelling, important, and insightful testimony. I'm
going to recognize myself for 4 minutes and direct a question
at Ms. Carlson. Then the rest of the panel should feel free to
comment.
As a preface to that question, I want to note that Ms.
Nazzaro said that there are at least 161,000 abandoned hard
rock mine sites in the States that GAO analyzed. Obviously
these areas need to be cleaned up. There are certain funding
problems that we've heard about in cleaning up the sites.
But I've also heard from groups who have the funds today to
clean up the sites who face liability challenges. With that in
mind I drafted legislation that would authorize the EPA and the
States to issue so called Good Samaritan permits. I did that in
the House. I intend to do so in the Senate as well.
The permits would address the obstacle of the Clean Water
Act liability exposure to those who had no responsibility at a
mine site to come in and help clean up any water pollution from
the site. I know, Ms. Carlson, you've worked on this particular
challenge in Colorado and all over the country. Can you tell us
about some of your experiences and whether in your opinion
there's a need for this type of language?
Ms. Carlson. Yes, thank you, Mr. Chairman. One of my
favorite topics, talking about how to clean up abandoned mine
sites. I think we have seen in Colorado and elsewhere, at least
in the States where there's water associated with abandoned
mines that water becomes an obstacle for State agencies, local
governments, even non-profit organizations in their efforts to
go out and try and clean up some of these old mine sites.
They're concerned about the liability under the Clean Water
Act.
We've been working with your office, Mr. Chairman and with
the relevant committees, Senate EPW and the House
Transportation Infrastructure Committee now for a while to see
if we can draw attention to this issue. Try and address the
liability for, under the Clean Water Act for cleanup of
abandoned mines. See if we can actually get some of the money
that I hope will come forward in Mining Law reform to address
our most important water pollution problems.
Senator Udall. Thank you. Any other members of the panel
care to comment?
Mr. Butler.
Mr. Butler. Mr. Chairman, just briefly. I do think that
there is a general agreement that that kind of a change in the
law is necessary. I know from my own practice that the
companies are discouraged from acquiring properties that have
been abandoned if there are potential environmental liabilities
whether Clean Water Act or otherwise associated with those
properties.
So if that hurdle were overcome I think you would see some
companies move in and clean up and re-mine some of these sites.
Senator Udall. Any other members of the panel like to
comment?
There are other examples in Colorado. One in particular
that's been high profile for many years near the Keystone ski
area, the Montezuma Mine was, still is, sending polluted waters
downstream. There were a couple of local non-profits that
wanted to help clean up that site.
As they further analyzed what it would take, they became
very concerned that those institutions would be exposed to
liability. They backed away. That clean up has not proceeded.
This is one example of an opportunity. If we could find our
way clear to make sure that the liability provisions are in
place for a Superfund that make sense, but also when you have
Good Samaritans who want to do this kind of work that they
could proceed.
Mr. Butler, if I might with the remaining time. I think
we'll do a couple rounds if Senator Risch can stay. Because I
know we have some areas that we'd like to pursue a little bit
further.
In your testimony you oppose the requirement in S. 796 that
all exploration activities including those covering five acres
or less should be subject to a permit. You state that requiring
a permit would not have any intended environmental benefits.
Upon what do you base that conclusion? Doesn't requiring a
permit mean that NEPA would apply while now under notice
operations it does not?
Mr. Butler. That's exactly correct. The notice process has
been going on under the BLM regulations for 30 years. Some
changes were made based on the NRC report. It's now limited
exclusively to exploration and full bonding is required.
The whole point of that exercise is that some of these
small exploration operations can be permitted, if you will,
without a specific permit being issued. It's similar to what
EPA and some State environmental agencies use as a permit by
rule. You specify what a company has to do and if they do that
they can go ahead. That's the way the notice level process
works.
For those small activities all that--if they go through the
NEPA process they go through environmental assessment and end
up with a finding of no significant impact this process allows
that exercise to be avoided, again for these five acre or less
exploration properties.
Senator Udall. Thank you for that clarification. I'm sure
this discussion will continue as we move forward on the
legislation.
Let me turn to Senator Risch. I know we'll have a couple of
rounds here. At least I want to pursue further discussion about
royalty and the best way to prescribe royalties.
Senator Risch.
Senator Risch. I'm going to jump in ahead of you on that.
Ms. Nazzaro, does the administration, have they stated a
position regarding the net return verses a gross tax?
Ms. Nazzaro. I've not seen anything that the administration
came out in favor or against any of the legislation that's
proposed.
Senator Risch. How about the GAO? Have you guys taken a
position at all on whether it should be net or gross?
Ms. Nazzaro. No. We've just laid out that the various types
so that you can see, you know, what occurs. What you really
need to take into consideration, not only is the type but also
the rate.
Because you could actually have, for example if you took
net proceeds where they get the greatest amount of deductions.
But if the rate was higher that could actually be not as
beneficial of a unit base that where the rate is lower. So it
really needs to be a combination of the two.
What we have taken a position on is as you get more from a
unit base to a net proceeds as I believe Secretary Salazar
mentioned today, it can get more difficult to audit and oversee
that because the more deductions, the more complex the
permitting would be and the provisions, it would be more
difficult to audit.
Senator Risch. Mr. Leshy, do you have a position on that?
Mr. Leshy. No, I think the GAO, Ms. Nazzaro laid it out,
the relevant issues.
Senator Risch. Ok. Mr. Baker, is it the MNA's position that
this bill should look at the Alaska model as being something
that's been tried and actually worked in a real life situation?
Is that the position of NMA?
Mr. Baker. Yes, certainly the Alaska model and the Nevada
model are both good examples of a royalty that has worked, a
royalty like taxes worked. As was mentioned earlier you've seen
the growth in mining in Nevada under that sort of legislation.
Same thing in Alaska, we've seen more mines come into
production.
We think it's the way to go.
Senator Risch. Any States have a gross tax right now?
Mr. Baker. The answer is yes. There are States that have
gross tax. But you also don't see a significant amount of
mining activity in those States. It's not a growing industry
where that's happening.
Senator Risch. Which States? Can you tell me off the top of
your head which States?
Mr. Baker. Off the top of my head, I cannot. But I'd be
happy to come up with a list and----
Senator Risch. Please.
Mr. Baker [continuing]. Supply that to the committee.
Senator Risch. Alright. I appreciate that. Thank you.
Mr. Leshy.
Mr. Leshy. Yes, Senator. I'm sorry to interrupt. But I did
have one thought that hasn't been mentioned concerning a
royalty. That is whether or not you permanently and totally
exempt existing mines verses only leveeing it on new mines.
That is a very significant issue. S. 796, I believe totally
exempts existing mines. The counterpart bill in the House does
not and neither does S. 140. It has a lower royalty on existing
mines, but it's not a permanent exemption.
That's a very important issue in part because of,
obviously, fairness to the existing mines. But also in terms of
what kind of revenues you're going to generate from this
because many of these mines or a number of these mines last a
very, very long time. I mean the Bingham Canyon is the classic
example. It's been mining for 140, 130 years and may mine for
another 30, 40, or 50 years.
If you totally and permanently exempt existing mines you're
creating a big hole in the revenue stream. That total and
permanent exemption is far past any, you know, repayment of the
original capital investment. So I urge caution in the committee
on that because if you totally and permanently exempt existing
mines you're really going to create a big hole in the revenue
stream.
It's an unwarranted hole because obviously existing mines
deserve some, you know, treatment that's different from new
mines in terms of the investment structure and all of that. But
a total and permanent exemption is not warranted in my view.
Thank you.
Senator Risch. But you're thinking of a phase in or
something like that?
Mr. Leshy. A phase in, a lower rate or combination of the
two, you know, a permanent, I mean an exemption for 10 years or
a lower rate for a period of years or something like that. But
that goes all out in perpetuity I think is too much.
Senator Risch. Thank you. Thank you, Mr. Chairman.
Senator Udall. Thank you, Senator Risch. Let me turn back
to Ms. Nazzaro, following up on Senator Risch's question. Can
you give us more information on State-owned hard rock minerals
and what type of royalty applies?
Ms. Nazzaro. Yes. We did a report last summer for the
committee where we looked at the 12 Western States and in the
four categories of royalties that we've been talking about
today. There is a table in that report that identifies which
States assess which type of royalties both on their State lands
and then for all lands.
I believe the question that Senator Risch asked had to do
with who was charging unit base? Was that the gross revenue?
Which States?
Arizona charges it on State lands and all lands.
California on State lands.
Colorado on State and all lands.
Idaho on State lands.
Montana, State lands.
New Mexico, State and all lands.
Oregon on State lands.
Utah on State lands.
Washington State on State and all lands.
Wyoming on State and all lands.
Senator Udall. Thank you for that clarification. As you
point out there's a table that lays this all out in your
report.
Ms. Nazzaro. Yes, in total 10 of those 12 States that we
looked at charge the gross revenue for State lands and 5 States
for all lands.
Senator Risch. Can I follow up?
Senator Udall. Sure.
Senator Risch. Is the rate up and down in each of those
States? I mean, is it uniform or is it all over the board?
Ms. Nazzaro. There is also an appendix in that report.
Actually it's in our testimony, the official statement that
goes State by State and gives you information on the type of
royalty, the royalty rates and then all the provisions.
Senator Risch. Off the top of your head, do you know what
the range is?
Ms. Nazzaro. It does, it definitely varies. I couldn't give
you the range. No. I could get that back to you.
Senator Risch. Thank you.
Senator Udall. I'm sure the GAO could. I'm sure our top
notch staff could help us analyze it as well. I know we're
talking about royalties. I'd like to take the opportunity to
see what the other witnesses think. We have such an expert
panel here of surface any different points of view and continue
the discussion.
Mr. Leshy, you know that Mr. Baker, Mr. Butler are going to
be strong in favor of a net proceeds royalty. Do you have
another point of view? What royalty do you think would be best?
Then how do you address their arguments about the cyclical
nature of the mineral commodities market and the need for a
royalty to be based on net proceeds?
Mr. Leshy. There are a couple of ways to think about this.
One is that as I think everybody has said a big virtue in
royalty is it has to be transparent and have minimum
opportunities for gaming. The more there's gaming in the system
and the more net it is the more opportunities there are for
gaming, basically. Because the more introductions you have, the
more supervision you need of the deductions and to make sure
that, you know, a fair royalty is paid.
So for that reason and because I think the States'
experience, as Ms. Nazzaro just pointed out, is that they use
gross royalties they must be happy with them. So I think that
is the way to go. In terms of the cyclical nature of the
industry, you know, first of all it depends on which component
of the industry. Some are more cyclical than others.
There are ways to ameliorate royalties in the oil and gas
and coal situation for example, the Secretary has authority to
forgive royalties in certain circumstances or reduce them if a
mine is going to shut down. I believe that S. 796 has exactly
that provision. So there are ways to design a royalty to make
sure that in the real dire circumstances of a down cycle you
don't throw people out of work.
So you can deal with that and still have a gross royalty or
something that looks close to a gross royalty.
Senator Udall. Thank you for that insight. Talk about
uranium, if you would. Do you think it ought to be treated as a
hard rock mineral under the 1872 law and why or why not?
Mr. Leshy. I think it should not. If you look at the
characteristics of uranium from just about every standpoint,
it's an energy mineral, it's a bedded mineral. It's mined much
more like coal than the hard rock minerals are.
It's kind of a quirk that it's under the Mining Law. It's
under the Mining Law, not because anybody thought about it. In
1872 uranium was not a mineral that was worth paying attention
to.
In the aftermath of World War II, we actually ended up when
uranium did become an interesting commodity. We ended up with
kind of a hybrid system because some uranium, Federal uranium,
is leased by the atomic energy, the old atomic energy
commission, now the Department of Energy. Some of it is subject
to the Mining Law.
There's never been a good reason to me why uranium should
be treated as a hard rock as opposed to more like an energy
mineral and leasable. S. 796 does have a provision calling for
a study of this issue. I'd say that's sort of the minimum. I
think it's worth considering just making it leasable in a
Mining Law reform situation.
Ms. Carlson. If I could add to that, Mr. Chairman.
Senator Udall. Please, Ms. Carlson. Yes.
Ms. Carlson. I know it was part of the debate that the
Senate is having with respect to climate changes there's a lot
of discussion about building more nuclear power plants in the
United States. That's really going to have a tremendous impact
on uranium markets as well as uranium production here in the
United States So it would make sense at this point to actually
get ahead of the curve and see if we could come up with a more
substantial, more responsible approach to uranium management,
particularly on our Federal lands.
Senator Udall. We're facing a time deadline here. If any of
the other panelists wanted to make a final comment. Mr. Baker?
Mr. Butler? I know Senator Risch and I would welcome that as
long it's within the 1- or 2-minute timeframe.
Mr. Baker. Sure, just one comment on the idea of the rate
changing or the Secretary waving some sort of fee or some sort
of royalty. Very, very difficult to implement. Very difficult
for a company to plan. Very difficult for a company to have
financing that's relying upon that sort of path.
You know, I don't think it's particularly a practical
benefit to rely upon. I think it's good to have it in the
legislation. But it's not something that too much weight should
be put on.
Senator Udall. Thank you. Mr. Butler.
Mr. Butler. I'll just add one point to that. There is quite
a bit of experience out there in administering the net proceeds
royalty, particularly in Nevada. The numbers are in my
testimony. I believe that the mining industry in Nevada paid
about $75,000,000, in net proceeds tax in 2007.
It's not that difficult to administer. There's a
substantial record in front of the House Resources Committee
that you might want to take a look at. My recollection is that
that's suggests that the numbers that are needed to basically
calculate the net royalty are numbers that most of the
companies have to report in other legally required
circumstances anyway.
So I think the opportunities for gaming the system are
minimal. I think you can have a transparent net royalty. The
advantage of that is that again when prices go down or costs go
up, you don't need to have an administrative intervention
because the amount of the royalty that has to be paid goes down
as a matter of the calculation.
Then when times are good. Prices are high. The government
gets a bigger check.
Senator Udall. Thank you. I'm sure this very hearty
discussion on royalty fee structure will continue. I do want to
thank the panel for coming from far and wide to share your
perspectives.
I would want to note that we've had several statements
provided for the record. Without objection, they will be
included in the hearing record. I assume each one of you would
be available to answer further questions over the next weeks.
With that this hearing in the Energy and Natural Resources
Committee is adjourned.
[Whereupon, at 11:46 a.m. the hearing was adjourned.]
APPENDIXES

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Appendix I

Responses to Additional Questions

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Responses of Robin M. Nazzaro to Questions From Senator Bingaman
royalty
Question 1. What royalty structure would you recommend if the
objective is to facilitate the federal government most effectively
ensuring the receipt by the American people of fair market value for
minerals mined on federal lands?
Answer. Our work focused on describing each ofthe state royalty
structures for hardrock mining in the 12 western states. We did not
analyze which structure would most effectively ensure the receipt of
fair market value for hardrock minerals mined on federal lands.
Question 2. GAO has undertaken extensive work relating to past
problems in royalty collections at the Department of the Interior. What
can we learn from the problems that have occurred with respect to the
past? Of the proposed royalty structures that you have analyzed for
hardrock minerals, what royalty structure is the most enforceable,
transparent and simplest?
Answer. Although we have not conducted the audit work necessary to
determine what royalty structure is the most enforceable, transparent,
or simplest, our prior work on federal oil and gas royalties suggests
four key matters to consider regarding a possible federal royalty on
hardrock minerals. First, the ability to determine an arms-length sales
price (referred to as market price transparency) is important to ensure
accurate royalty valuation. Gross revenue, net smelter returns, and net
proceeds royalties are all calculated by multiplying the royalty rate
by production volume by price minus certain costs (if allowed). Having
adequate market price transparency will be important in order for
Minerals Management Service (MMS) staff to verify the accuracy of these
calculations and ensure the public is properly compensated for the hard
rock minerals removed from federal land. Second, royalty deductions,
exclusions, allowances, and provisions for royalty relief can add
complexity to royalty calculations. This complexity can lead to errors
in royalty valuation as well as auditing and compliance challenges. The
most costly example of this problem that we observed in our prior oil
and gas work involves the oil and gas royalty relief provisions in the
Gulf of Mexico that were incorrectly administered which resulted in
forgone royalties of between $21 billion and $53 billion, depending on
total production, future oil and gas prices, and the outcome of
litigation (see GAO-08-792R). Third, it will be important for MMS to
conduct inspections to verify production quantities. We have previously
reported that Interior lacks adequate assurance that federal oil and
gas volumes are being measured accurately as required by law and agency
policy (see GAO-08-893R). Finally, it will be important for MMS to have
the administrative tools necessary for conducting audits and ensuring
compliance. In her testimony to this Committee on Januazy 24, 2008,
Deborah Gibbs Tschudy, MMS' Deputy Associate Director of Minerals
Revenue Management, stated that MMS will be challenged to implement a
royalty program for hard rock minerals, noting that MMS will require
additional audit staff, modifications to its web-based reporting
systems, effective audit and investigative authority, and a strong and
effective enforcement system.
Question 3. What is the range of royalties (including functional
royalties and severance taxes) charged by states for the production of
hardrock minerals from state lands?
Answer. We reviewed 12 states' royalties for hardrock mining on
state lands and functional royalties (such as severance taxes) for
hardrock mining on state, federal, and private lands. All 12states have
at least one royalty or functional royalty that is calculated by a
percentage rate times a base, minus deductions and subject to other
limitations. While these royalties all use a percentage rate, their
bases, deductions, and limitations vary so widely that the percentages
alone-ranging from 0.125 percent to 12percent-are not useful for
comparing the magnitude of different royalties. For example, Alaska's
mining license tax uses rates of 3 percent to 7 percent, but the first
3.5 years of mine production are exempt, and there is an exploration
incentive credit. Colorado, in contrast, charges a severance tax of
2.25 percent on metallic minerals, but exempts the first $19 million
per year in income, as well as giving a credit for the royalty. These
examples illustrate the difficulty in comparing the magnitude of
different royalties in the abstract. In addition, of these 12 states, 5
have at least one royalty or functional royalty that is unit-based;
that is, the amount charged is calculated by a fixed dollar amount per
unit and does not rely on a percentage rate applied to value. For
example, California's fee on gold is $5 per ounce. Finally, several
states have at least one royalty for which the rate or amount is
determined on a case-by-case basis by the administrative agency; we did
not collect data on the actual rates states charged for these
royalties.
Question 4a. What type of royalty (gross, net smelter, or net
profits or net proceeds) is used by the most states with respect to
state-owned minerals?
Answer. Many of the 12 western states that we examined assess
multiple types of royalties on state-owned lands, often depending on
the mineral being extracted. Ten states assess a gross revenue royalty,
three assess a net smelter returns royalty, three assess a net proceeds
royalty, and two assess a unit-based royalty.
Question 4b. Do most states allow the subtraction of transportation
and processing costs? Do most states allow the deduction of
exploration, insurance, capital and sales costs?
Answer. Because all of the 12 western states we examined used
multiple types of royalties depending on the mineral being extracted or
land ownership, it is difficult to generalize about the deductions that
are typically allowed within a state or across the states. For example,
Idaho has two royalties that apply to hardrock minerals extracted from
state lands. One ofthese applies to gold extracted from riverbed
mineral leases and does not identify any deductions for transportation
or processing while the other applies to all other minerals and does
allow deductions for transportation and processing. However, deductions
for transportation and processing costs are typically allowed by both
net smelter returns and net proceeds royalties. All states except
Oregon and Washington assess at least one royalty or functional royalty
on federal, state, and private lands that is either a net smelter
returns or net proceeds royalty. Deductions for exploration, insurance,
capital and sales cost, among other things, are sometimes allowed by
net proceeds royalties. Eight states assessed at least one net proceeds
royalty (Alaska, Arizona, California, Colorado, Idaho, Nevada, New
Mexico, and Utah), while four states did not (Montana, Oregon,
Washington, and Wyoming.)
Question 5. How many states impose a royalty or tax on hardrock
minerals mined from federal lands?
Answer. Eleven ofthe 12 western states that we evaluated assessed a
functional royalty (typically in the form of a severance or license
taxes) on the hardrock mining operations on federal lands, as well as
state and private lands-Oregon was the only state not to do so.
mineral imports/exports
Question 6. I know that GAO has done a review of imports and
exports of hardrock minerals. What trends did you observe? Could you
please submit your findings for the record?
Answer. The Department of the Interior's U.S. Geological Survey
(USGS) annually calculates U.S. ``net import reliance as a percentage
of U.S. apparent consumption'' (hereafter referred to as ``net import
reliance'') for nonfuel minerals using production data from annual USGS
mineral industry surveys and import and export data from other sources.
We analyzed these USGS data for 15 common hardrock minerals from 1975
through 2007 and observed multiple trends. The degree to which the
United States has relied on imported minerals to satisfy its domestic
consumption has held relatively constant for 4 of those minerals
(fluorspar, gypsum) palladium, and platinum); fluctuated for 5 (copper,
lead, silver, tungsten, and zinc); increased for 4 (barite, magnesium
compounds, magnesium metal, and perlite); and decreased for 2 (gold and
nickel.)
Moreover, in some years, the United States was a net exporter of
some hardrock minerals. (These data can be found in Enclosure III of
GAO-08-849R.)
Response of Robin M. Nazzaro to Question From Senator Murkowski
Question 1. Dr. James Otto testified in January 2008 that the
viability of most mining projects is jeopardized when the total
government take from combined taxes reaches 50 percent.
In terms of the total government take (i.e., the sum of state,
federal and other taxes, fees, and royalties), can GAO quantify for the
Committee whether or not the royalties imposed under either S.796 or
S.140 would cause the U.S., or any individual state, to exceed that 50
percent threshold?
Answer. Our work focused on describing the 12 western states'
royalty structures for hardrock minerals. We did not conduct the audit
work necessary to determine the total govemment take from combined
taxes and the proposed royalties in S 796 and S 140.
Response of Robin M. Nazzaro to Question From Senator Wyden
Question 1. Ms. Nazarro, you testified that Oregon is the only one
of the twelve Western states that does not implement functional
royalties. Has this particularly hindered cleanup efforts in Oregon on
abandoned mine sites?
Answer. Our work was limited to describing the 12 westem states'
royalty structures for hardrock mineral and we did not examine how the
states used the royalties.
______

Responses of Cathy Carlson to Questions From Senator Bingaman
aml reclamation
Question 1. How many jobs do you estimate the AML program provided
by S. 796 will create?
Answer. It is difficult to estimate the total amount of revenue
that will be available to the abandoned mine fund annually, given the
uncertainty of the funds generated by a royalty. EARTHWORKS anticipate
that the majority of the funds available to the Abandoned Mine Program
will come from the reclamation fee and the land use fee that is
established in S. 796. The land use fee should generate at least $2
million annually, and will likely be more than that amount, depending
on future mineral activities on federal land. EARTHWORKS calculates
that a 0.3 percent reclamation fee will generate at least $50 million
annually to the fund. This is based on the USGS estimate of total
hardrock mineral production for the last year information is available
of $15--16 billion, multiplied times the minimum percentage in S. 796.
Based on this estimate, at least $52 million annually will be
available for abandoned mine restoration, plus whatever funds are
generated by the royalty looking forwards in time. The State of Montana
estimates that every $1 million dollars spent on abandoned mine
restoration will generate 65 jobs. Montana has substantial experience
with abandoned mine restoration work, since they have been able to
complete a comprehensive inventory of the abandoned hardrock mines in
the state and initiate clean up projects at several priority sites.
If the hardrock abandoned mine program had at least $52 million
annually available for restoration, EARTHWORKS estimates that at least
3400 jobs would be generated for abandoned hardrock mine restoration.
These are good paying jobs in rural communities; bulldozer operators,
reclamation specialists, and engineers.
If the Secretary of the Interior or the Congress determines that a
0.5 percent reclamation fee, or even a 1.0 percent reclamation fee is
appropriate, the number of jobs created by the abandoned hardrock
program will increase exponentially. In addition, if the federal
government would collect a royalty from existing mines, even if there
was a phase-in period for the new royalty, the number of jobs created
for abandoned mine restoration would increase as well. The
Congressional Budget Office determined that creation of a royalty for
hardrock mining on public lands would create jobs overall.
Question 2. How did you arrive at your estimate of $50 billion for
AML reclamation costs?
Answer. EARTHWORKS conducted an extensive survey of state hardrock
abandoned mine programs in the West in the early 1990s and updated that
information in 2003. We requested information on the number of
abandoned mine sites in each state, and received information regarding
best estimates of the amount of revenues necessary to clean up
abandoned mines. Based on this information, EARTHWORKS found that the
estimated reclamation costs for abandoned hardrock mines ranged from
$32--72 billion in the Western states, including federal, tribal, state
and private land.
More recently, the Environmental Protection Agency reviewed the
estimates of abandoned hardrock mine restoration. They determined that
the estimated cost of abandoned hardrock mine restoration could be as
high as $54 billion.
For the purposes of our testimony, I used $50 billion as a mid-
range number in our estimate that $32-72 billion will be needed for
abandoned mine restoration. It may be more accurate to include the
range of costs, since there has never been a comprehensive inventory to
determine the total costs in all the western state to restore abandoned
hardrock mines.
uranium
Question 3. Do you think that uranium, as an energy mineral, should
be treated as a hardrock mineral under the Mining Law of 1872, as is
currently the case? Why or why not?
Answer. Uranium is the only energy mineral that is currently
treated as a locatable mineral under the Mining Law of 1872. Congress
passed the Mineral Leasing Act in 1920 to regulate the extraction of
coal and oil and gas under a leasing system. More recently, Congress
amended the Mineral Leasing Act to include oil shale. It makes sense
for all the energy minerals to be treated under the same regulatory
scheme.
Uranium development has left a tragic legacy in much of the West.
Communities continue to deal with the health impacts of unregulated
uranium mining, water sources have been polluted, and agricultural
lands have been affected.
Looking forwards in time, uranium production may be a critical
component of the Nation's energy policy, with a renewed interest in
nuclear power to meet our energy needs. If this is the case, uranium
should be leased under the Mineral Leasing Act on a competitive basis
to make sure that the public receives a fair return for this commodity.
Response of Cathy Carlson to Question From Senator Murkowski
Question 1. S.796 and S.140 allow ``persons, corporations,
associations and foundations'' to make donations to the abandoned mine
clean-up fund.
Is Earthworks prepared to put some of its financial resources into
this effort?
Answer. EARTHWORKS is very interested in working with state and
local governments to identify priority projects for consideration and
help secure funding for these projects. We also work closely with
grassroots organizations at the local level and can assist their
efforts to clean up abandoned mines.
As a non-profit organization, we are not benefiting from mineral
production from federal lands. In contrast, the United States produced
over $16 billion in hardrock mineral production, and most of this
production comes from the western United States. An undetermined, but
substantial, amount of that total production is taken from federal
lands without a return to the federal treasury. We believe the
principal beneficiaries of the mineral development on public lands
should assist the government's efforts to clean up the legacy of
abandoned mine sites.
To date, we have not raised funds specifically to finance the
abandoned mine restoration fund. We would be interested, if such a fund
is established, in soliciting contributions to the fund from our
members and supporters.
Response of Cathy Carlson to Question From Senator Bingaman Wyden
Question 1. Mining operations have a poor track record on the
American landscape. The EPA estimates that hardrock mining has degraded
approximately 40 percent of western watersheds and that the clean up
abandoned mines could cost taxpayers up to $50 billion. How has
pollution from abandoned mines affected potential wilderness areas,
wild and scenic rivers, National Parks, and other sensitive areas
protected by Senator Bingaman's legislation?
Answer. There is an extensive legacy of abandoned mines across the
western United States causing pollution to some of our most significant
wildlands, river and other sensitive areas. For example, the National
Park Service conducted an extensive inventory of abandoned hardrock
mines in the National Parks, and discovered over 2000 abandoned sites
that need restoration. Some of the highest priority National Parks for
abandoned mine restoration are the Wrangell--St. Elias National Park in
Alaska and the Death Valley National Park and Mojave National Preserve
in California.
Congress recently approved stimulus funds to assist in some
restoration work in the National Parks, which included restoration work
for abandoned mines in Denali National Park (AK), Lake Mead National
Recreation Area (NV) and other locations, but this is a drop in the
bucket compared to the extent of the problem.
Our Nation's Wild and Scenic Rivers are also polluted from
abandoned mines. For example, the Rogue Wild and Scenic River in Oregon
is degraded from pollution discharging from abandoned mines,
particularly the Alameda Mine. The Alameda Mine discharges acidic
waters with high concentrations of heavy metals, and it is affecting
the downstream sections of the Rogue River.
In addition to those rivers formally recognized as Wild and Scenic,
Trout Unlimited identified numerous rivers in the West that are
significant for their fisheries, but are polluted from abandoned mines,
in their report Settled, Mined and Left Behind. Trout Unlimited's focus
in their report included the American Fork River in Utah, the Red River
in Oregon and the Blackfoot River in Montana.
One of the most significant problems from abandoned hardrock mine
pollution can be found in the watersheds of some of the major cities in
the West. The South Platte River in central Colorado provides drinking
water and recreation opportunities for millions of people along the
Front Range, but its headwaters are polluted from old mine workings.
Pinto Creek in central Arizona feeds into the water supply for the City
of Phoenix, but it is pockmarked with abandoned mines. The Mokolumne
River in California provides drinking water for millions of people in
the Bay Area, but needs to be treated to clean up metals and other
pollutants from abandoned mines.
If Congress established and funded an abandoned mine restoration
program for hardrock mines, similar to the program that currently
exists for coal, we could restore the rivers and streams of the West
and reduce the costs associated with treating water from these rivers
for domestic and industrial uses. We could improve the recreational
opportunities along these rivers as well, by enhancing the fisheries
and cleaning up the water.
Thank you for the opportunity to submit answers to these questions
for the record. Please feel free to contact me if you any additional
questions.
______

Responses of Jim Butler to Questions From Senator Murkowski
Question 1. S.140 seeks to impose a royalty of 4 percent on
existing operations. In response to a question posed at a hearing on
the 1872 Mining Law last Congress, the MMS said ``when the United
States imposes royalties on mineral production, it is asserting a
property interest''.
In your opinion, would the royalty on existing mines contained in
S.140 withstand a legal challenge on the grounds that it constitutes a
taking of private property under the Fifth Amendment to the
Constitution of the United States?
Answer. It is notoriously difficult to predict how the courts
(including the U.S. Supreme Court) might rule on regulatory takings
cases. The Supreme Court has stated that regulatory takings cases
typically require an ``ad hoc, factual inquiry'' into the specific
circumstances of each claim. Where a government action renders private
property essentially valueless or deprives the owner of any economic
use of his or her property, then the Constitution requires that the
government compensate the property owner for that taking.
The 4 percent royalty on existing operations contained in S. 140
will simply take 4 percent of the gross proceeds from each existing
mine. That will affect operations differently, but it is likely that
the 4 percent loss in revenue will be sufficient to force some
operations to cease mining earlier than would otherwise have happened
or will render some portions of the property, or some mining claims
essentially valueless. Those properties will have a viable takings
claim.
The Committee should review the history of takings litigation
associated with the Surface Mining Control and Reclamation Act
(``SMCRA''). Today, decades after SMCRA's enactment, takings cases
continue to work their way through the courts. The federal government
has paid out millions in compensation for takings under SMCRA. The
royalty provisions of S. 140 and the regulatory provisions of H.R. 699
will render mining properties unusable or uneconomic and will result in
substantial takings claims against the government.
Question 2. States generally have some power to regulate federal
lands within their borders unless a conflict with federal law arises.
Section 308 of S.796 presumably seeks to ensure that any state laws or
regulations that are stricter than the requirements of S.796 cannot be
considered as conflicting with that federal law (if enacted).
What is your view of the impact that Section 308 of S.796 would
have on the 1987 California Coastal Comm'n v. Granite Rock Co. decision
by the U.S. Supreme Court?
Answer. The Supreme Court's decision in Coastal Comm'n v. Granite
Rock Co., 480 U.S. 572 (1987) is frequently cited for the proposition
that, while state and local governments may regulate mining operations
on federal lands to protect public health, safety and the environment,
they may not restrict mining activities (through zoning or
environmental controls) so severely as to frustrate the purposes of the
federal mining laws. Thus, for example, in South Dakota Mining Ass'n
Inc. v. Lawrence County, 155 F.3d 1005 (8th Cir. 1998), the Court of
Appeals for the Eighth Circuit cited Granite Rock to hold that a county
ordinance prohibiting issuance of any new or amended permits for
surface metal mining was preempted by federal law.
Section 308 authorizes state reclamation, environmental, public
health protection, bonding or inspection standards that are more
stringent than S. 796 by declaring that they are not inconsistent with
the new mining act. Section 308 thus provides that state reclamation
and environmental standards--even if stricter than federal law--are not
preempted. State or local zoning or land use planning standards that
prohibit mining, however, should still be preempted. For example, the
ordinance in South Dakota Mining Ass'n, which was considered by the
court to be ``a de facto ban on mining'' should not be affected by
Section 308.
Potentially more significant, however, are the changes to the
federal mining laws which are made by S. 796. For example, section
506(c)(1) states that ``This Act supersedes the general mining laws,
except for the provisions of the general mining laws related to the
location of mining claims that are not expressly modified by this
Act.'' In South Dakota Mining Ass'n, and in similar cases, courts have
looked to the mining law to determine the purpose of federal law and,
in turn, to determine whether such purposes were frustrated by a state
or local enactment. In South Dakota Mining Ass'n, the court cites 30
U.S.C. Sec. Sec. 21 and 22 to determine that Congress had declared a
national interest in the orderly and economic development of domestic
mineral resources. S. 796 should restate and reaffirm that development
of domestic mineral resources on public land--subject to appropriate
environmental regulation and control--is in the national interest.
Responses of Jim Butler to Questions From Senator Barrasso
uranium mining
Question 1. Nuclear energy currently provides more than 70 percent
of the U.S.'s emission-free electricity. Nuclear power is a key part of
our clean energy future. The United States imports most of the uranium
it needs for its nuclear power generation.
Wyoming is the largest uranium producer and has the nation's
largest uranium reserves. The U.S. has the domestic reserves to
dramatically reduce our dependence on foreign uranium. Increased
domestic uranium production is critical for maintaining as well as
expanding our current nuclear power capacity.
It seems to me that uranium--in terms of discovery, mining,
processing, and physical characteristics--is similar to gold, silver,
copper, and other locatable minerals. I strongly believe that uranium
should remain a locatable mineral.

How does the uranium mining process compare to other
locatable minerals with regards to exploration, discovery, and
development?
How does it compare to leasable minerals?
What would the impact of changing uranium to a leasable
mineral be on domestic uranium mining?
What countries would the U.S. turn to over the next 20 years
to compensate for a diminished domestic uranium supply?

Answer. Uranium provides a good example of how the mining law (and
the system for locating mining claims) quickly and effectively responds
to the forces of supply and demand. When uranium demand is high and
prices rise, claims are located, exploration increases and new
resources are found and developed. Changing to a leasing system for
uranium would make the system less responsive and would rely on
government identification of potential resources. If domestic demand
for uranium increases, it is more likely additional resources would be
imported if uranium is moved to a leasing system.
Historically, uranium exploration and mining have been more similar
to the hard rock minerals than to coal, or oil and gas.
bentonite
Question 2. I have serious concerns with Section 504 of S. 796 and
its impact on bentonite mining in Wyoming. Wyoming is blessed with some
of the highest quality bentonite in the world. It provides good paying
jobs and a significant source of revenue for State and local
governments.
I am concerned that Section 504 would remove Wyoming bentonite from
the list of locatable minerals.

Do you think in terms of exploration, development, and
production, it makes sense to remove Wyoming bentonite from
being defined as a locatable mineral?
What would the practical impact of Section 504 be on
domestic development of bentonite?

Answer. Section 504 of S. 796 would eliminate the ability to locate
and develop uncommon industrial minerals (such as Wyoming bentonite) as
locatable minerals under the mining law. Instead, those minerals would
be disposed of under the Minerals Materials Act. While the ``uncommon
varieties'' provisions of the mining law present some unique legal
questions, the system has historically and continues to function
effectively. Section 504 should be eliminated from S. 796 and these
materials, including Wyoming bentonite, should continue to be subject
to location and development under the general mining laws. I have had
the opportunity to review the statement of the Industrial Minerals
Association--North America on S. 796 which was submitted to the
Committee and which addresses Senator Barasso's questions regarding
Wyoming bentonite. I agree with that statement.
______

Response of Phillips Baker, Jr., to Question From Senator Murkowski
Question 1. An opportunity to provide regulatory certainty has
always been an aspect of Mining Law reform that benefits all
stakeholders. Do you believe that S.796 and S.140 increase or decrease
the level of certainty regarding regulations with which the mining
industry must comply?
Answer. I agree completely that regulatory certainty should be the
cornerstone of Mining Law reform. Uncertainty in the legal and
regulatory regime applicable to mining projects inevitably chills the
climate for capital investments in domestic mining projects. Without
such certainty, including security of tenure or title, mining projects
in the United States will not be able to attract the large capital
investments needed to bring such projects to fruition and thus will
exacerbate this nation's reliance on foreign sources of minerals.
While, the mining industry supports reasonable amendments to the
Mining Law, including a fair financial return to the government for the
use of federal lands, regulatory certainty is critical to attract
investment and keep U.S. mining competitive in the global marketplace.
S. 796 and S. 140, however, decrease the level of certainty regarding
the regulatory regime applicable to mining. For example, S. 796 creates
significant uncertainty by leaving critical details to be hammered out
in future regulations, including the exact amount of the royalty; how
deductions from the royalty are calculated and the standard to be used
to determine the royalty rate. Furthermore, S. 796 fails to replace the
security that was provided by patenting with explicit legislative
language that grants claimholders the right to use and occupy the land
for all mineral activities authorized under the Mining Law.
S. 140 also fails to properly balance a fair return to the public
and the need to encourage the private investment required to develop
mining operations and provide the resources our economy needs.
Specifically, S. 140 would impose an 8 percent gross royalty on
production from new mining claims, one of the highest government-
imposed rates in the world, and as such will obviously impact return on
investment, our ability to create good paying jobs here at home and our
ability to meet more of our own needs for minerals. Furthermore the
reclamation fee contained in S. 140 is an additional and unnecessary
burden on mining companies that does not take into consideration the
total tax contribution of mining companies, and will undermine
investments in mine development.
Responses of Phillips Baker, Jr., to Questions From Senator Barrasso
uranium mining
Question 1. Nuclear energy currently provides more than 70 percent
of the U.S.'s emission-free electricity. Nuclear power is a key part of
our clean energy future. The United States imports most of the uranium
it needs for its nuclear power generation.
Wyoming is the largest uranium producer and has the nation's
largest uranium reserves. The U.S. has the domestic reserves to
dramatically reduce our dependence on foreign uranium. Increased
domestic uranium production is critical for maintaining as well as
expanding our current nuclear power capacity.
It seems to me that uranium--in terms of discovery, mining,
processing, and physical characteristics--is similar to gold, silver,
copper, and other locatable minerals. I strongly believe that uranium
should remain a locatable mineral.
How does the uranium mining process compare to other locatable
minerals with regards to exploration, discovery, and development?
Answer. Uranium, as a metallic mineral, is much more akin to
hardrock minerals governed by the Mining Law than fossil fuels under
the Mineral Leasing Act. Extraction of uranium on federal lands is
conducted similarly to extraction for other hardrock minerals governed
by the Mining Law, involving advanced mining activities rather than
traditional extraction techniques for energy resources such as oil and
gas or coal. Oil and gas and coal are relatively plentiful, and occur
over relatively large areas where found. Hardrock minerals are scarce
and occur in small concentrations, and must be discovered by expending
considerable money pursuing elusive prospecting clues. Once a prospect
is identified, development commences at considerable cost, with the
capital and labor intensiveness of large coal mines, but without the
geologic or metallurgical certainty of coal mines. Furthermore, the
combination of price volatility and the variations in the concentration
and the chemical and geological characteristics of hardrock minerals
such as uranium within an ore body can turn a profitable mine into
valueless rock with a sudden downturn in the market.
Question 2. How does it compare to leasable minerals?
Answer. Uranium differs from leasable minerals such as oil and gas
and coal. More exploration for uranium is required to find commercial
developable deposits and unlike the leasable minerals, uranium requires
significant processing prior to having a marketable product. For
example, oil and gas are more readily marketable after being mined.
Crude oil is sold in local and international markets and the price of
the product that comes out of the ground is generally readily
ascertainable at the well. Gas is also often sold at the well head, in
some cases without any processing. Like other hardrock minerals, upon
initial extraction, uranium itself has no real economic value--
considerable upfront investment and ongoing operating expense must be
incurred to turn it into a marketable product.
Question 3. What would the impact of changing uranium to a leasable
mineral be on domestic uranium mining?
Answer. Uranium deposits on federal lands should be developed
pursuant to the Mining Law rather than the Mineral Leasing Act. The
Mining Law provides an incentive for those who take substantial
financial risk to develop a mineral deposit. To encourage mineral
development, the Mining Law is uniquely self-executing in that a
citizen may enter upon much of the public lands and explore for
minerals. 30 U.S.C. Sec. 22. Thus, the Mining Law allows the right of
self initiation and those who explore for and discover a valid claim,
obtain the right to develop that claim as long as they meet all
applicable statutory and regulatory requirements. By introducing great
uncertainty regarding the lands ultimately available for uranium
exploration and development, a leasing system will only serve to
increase the United States' reliance on foreign sources of uranium.
Question 4. What countries would the U.S. turn to over the next 20
years to compensate for a diminished domestic uranium supply?
Answer. The United States currently consumes about 56 million
pounds of uranium each year, yet only produces 4 and a half million
pounds. The U.S. has the world's largest fleet of reactors and one of
the world's largest resource bases of uranium of any country in the
world. Yet, the U.S. imports over 90% of what is needed to operate its
nuclear reactors. Traditionally, the United States has imported uranium
primarily from Canada, Russia and Australia.
Other, less stable, countries such as Namibia and Kazakhstan, are
increasingly contributing to U.S. imports. In addition, these other
sources will become increasingly important as we face competition from
China for available uranium.
bentonite
Question 5. have serious concerns with Section 504 of S. 796 and
its impact on bentonite mining in Wyoming. Wyoming is blessed with some
of the highest quality bentonite in the world. It provides good paying
jobs and a significant source of revenue for State and local
governments.
I am concerned that Section 504 would remove Wyoming bentonite from
the list of locatable minerals.
Do you think in terms of exploration, development, and production,
it makes sense to remove Wyoming bentonite from being defined as a
locatable mineral?
Answer. Section 504 of S. 796 would wrongly eliminate the ability
in the future to locate ``uncommon varieties'' of certain minerals such
as bentonite, high grade calcium carbonate and chemical grade
limestone. These are specialty minerals that are not easily located or
developed and as such, need the incentives provided by the Mining Law
to encourage their development. NMA thinks any amendments to the Mining
Law should preserve the ability to locate minerals that have clearly
been historically recognized and are readily identifiable as uncommon
varieties of industrial minerals.
Question 6. What would the practical impact of Section 504 be on
domestic development of bentonite?
Answer. Bentonite deposits on federal lands should be developed
pursuant to the Mining Law rather than the Minerals Materials Act. The
Mining Law appropriately provides an incentive for those who take
substantial financial risk to develop bentonite. Placing bentonite
under the disposal by sale system of the Minerals Materials Act will
introduce great uncertainty regarding the lands available for bentonite
exploration and development, and will ultimately result in decreased
domestic production of bentonite.
______

[Responses to the following questions were not received at
the time the hearing went to press:]

Questions for Hon. Ken Salazar From Senator Bingaman
general
Question 1. Does the Administration support the key concepts
included in S. 796: that patenting should be eliminated; a reasonable
royalty should be required; the law should be modernized; clear
environmental standards should apply; and a robust abandoned mine land
program should be established with a dedicated stream of funding?
abandoned mine lands
Question 2. Does BLM have an inventory of the universe of abandoned
hardrock sites on federal lands (including BLM and Forest Service)?
Please provide your estimate of the number of abandoned hardrock mines
on BLM and Forest Service lands listed by state.

How much money does BLM expend annually on abandoned
hardrock mine sites?
How much money would be needed to conduct a comprehensive
inventory?
What is the estimate of money needed to reclaim these sites?
data
Question 3. Please provide the following information for the
record:

The number of mining claims located for each of the past 10
years listed by state.
The amount of claim maintenance fees collected for each of
the past 10 years listed by state.
The amount of claim location fees collected for each of the
past 10 years listed by state.
The amount of funding expended to administer the hardrock
mining program at BLM for each of the past 10 years.
The number of notice operations listed by state.
How many approved mining permits are there? Please list by
state. Please provide number of acres of federal land covered
by these permits.
Questions for Hon. Ken Salazar From Senator Murkowski
Question 1a. Section 307 of S.796 requires your agency to review
massive amounts of federal acreage to determine its suitability for
hardrock mining. The section also largely abandons the existing process
for withdrawals of this kind as authorized under the Federal Land
Policy and Management Act of 1976 (FLPMA).
Is it the Administration's view that this existing FLPMA process,
which has been in place for over 30 years, is flawed in some way?
Question 1b. Is it the Administration's view that it should be made
easier for the Interior Department to put domestic minerals off-limits
to production through Administrative action?
Question 2a. In reaching a decision as to whether or not there is
concurrence with the Administration's response to the previous
question, it is essential that Congress have some metric by which to
judge the efficacy of the existing withdrawal authorities and
processes. Understanding the importance of such information, please
provide two numbers.
First, how many total acres of federal land (including land managed
by the U.S. Forest Service) have been withdrawn from location and entry
under the General Mining Law of 1872 through Administrative, Executive
branch authorities for such actions as contained in Federal Land Policy
and Management Act (FLPMA), since that bill's enactment in 1976?
Question 2b. And second, how many total acres of federal land
(including land managed by the U.S. Forest Service) have been withdrawn
from location and entry under the General Mining Law of 1872 through
the enactment of other, non-FLPMA, Congressionally-directed actions
since FLPMA's enactment in 1976?
Question 3a. A 1999 report to Congress by the National Academies'
National Research Council concluded that, ``the overall structure of
the federal and state laws and regulations that provide mining-related
environmental protection is complicated but generally effective''. It
should be noted that Administrative improvements have been made since
that finding.
Yes or no, does the Administration agree with this conclusion?
Question 3b. If no, what specific recommendation(s) of the 16
identified on pages 93-123 of that report remain insufficiently
addressed, either through Administrative or Congressional action, in
the Administration's view?
Question 3c. Further, and again only if the Administration does not
agree with the aforementioned conclusion, what additional issues does
the Administration believe are not sufficiently addressed by the
existing environmental protections for hardrock mining as contained in
the Bureau of Land Management's so-called 3809 regulations?
Question 4a. I am concerned that, in aggressively pursuing a
transition to alternative energy technologies, the United States risks
trading a reliance on foreign sources of oil for a reliance on foreign
sources of minerals. The demand for minerals is apparent in the use of
quartz crystal for photovoltaic panels (100% imported), indium for LED
lighting technologies (100% imported), and rare earths for advanced
batteries (100% imported).
Do you share this concern?
Question 4b. If so, do you believe reforms to the Mining Law should
decrease, maintain, or increase the ability of the U.S. to produce the
raw materials needed for clean energy technologies domestically?
Question 5. During your time in the Senate you played a central
role in the debate over protecting from liabilities the ``Good
Samaritans'' that may seek to clean up abandoned mines.
Do you think Good Samaritan protections remain an opportunity to
facilitate the clean-up of abandoned mines?
Questions for Hon. Ken Salazar From Senator Wyden
Question 1. In your answer to questions from Senator Cantwell, you
indicated that the Department of Interior has the ability to prevent
mining claims that may cause undue degradation to public lands.
However, many advocates of hardrock mining law reform suggest that
mining, as mandated by the 1872 Mining Law, is to be treated as the
highest and best use of public land, which creates a strong presumption
in favor of allowing mining. Can you provide the Committee with a list
of claims in the last five years that have been rejected because of
concerns of undue degradation?
Question 2. Have there been incidences where mining claims were
granted despite potential environmental concerns because of the
priority given to mining as a use of public lands?
Question 3. As you know, the proposed legislation provides
authority for the Department of Interior for a rulemaking on how
royalties are applied to different categories of mining interests. Can
you tell me some principles you would use in guiding that rulemaking
process and ensuring that there was transparency?
Questions for Hon. Ken Salazar From Senator Barrasso
public land withdrawals
Question 1a. Section 307 of S.796 mandates reevaluation of federal
lands for withdrawal of minerals, opening up every single land
management plan across the country. It would give the agencies new
powers for mineral withdrawals. These are serious policy initiatives,
with serious consequences.
The bill states that this entire process would be completed in
three years.
Is such a massive undertaking really possible in that timeframe?
Question 1b. On average, how many years does each Resource
Management Plan take, start-to-finish?
Question 2. In Wyoming, many RMPs are delayed by activist appeals
and litigation.
What effect do administrative appeals and litigation have on the
timeline imposed on you in the bill?
Question 3. What would be the effect of this mandate on other, non-
mining users of public lands?
How would other administrative duties, such as grazing permit
renewal, and trail designation, be affected?
Question 4. The BLM and Forest Service are extremely short on
resources.
Can the agencies pay for this massive undertaking-without
shortchanging management?
Question 5. Mining is a critical part of Wyoming's economy as well
as our nation's economy. It provides good paying jobs for hardworking
people. Minerals are also a crucial component our nation's
infrastructure, our energy security, our health care technology, and
our national security. Pushing American mining jobs overseas and
increasing our dependence on foreign imports would have a devastating
impact on our economy and our security.
Do you believe we need to increase the amount of federal lands off-
limits to resource development?
Appendix II

Additional Material Submitted for the Record

----------

[Due to the large amount of material received, only a
representative sample of statements follow. Additional documents and
statements have been retained in committee files.]
Statement of Roger Featherstone, Director, Arizona Mining Reform
Coalition, Tucson, AZ, on S. 796 and S. 140
On behalf of the Arizona Mining Reform Coalition, I appreciate the
opportunity to express our views about S. 796 and S. 140. Several of
our member groups have submitted their own testimony and we support and
incorporate their testimony into ours.
The Arizona Mining Reform Coalition works in Arizona to improve
state and federal laws, rules, and regulations governing hard rock
mining to protect communities and the environment. We work to hold
mining operations to the highest environmental and social standards to
provide for the long term environmental, cultural, and economic health
of Arizona. Members of the Coalition include: The Grand Canyon Chapter
of the Sierra Club, EARTHWORKS, Save the Scenic Santa Ritas, The
Dragoon Conservation Alliance, the Groundwater Awareness League,
Concerned Citizens and Retired Miners Coalition, the Center for
Biological Diversity, and the Sky Island Alliance.
background
We commend Senator Bingaman and Senator Feinstein for their
leadership in the long overdue and arduous process of reforming this
anachronistic law. After 137 years, reform is long overdue. The 1872
Mining Law was passed in a time when the goal of the United States was
to expand from coast to coast and to displace Native American nations
especially in the West. That goal, right or wrong, has long since been
fulfilled. Of all the major laws that govern the use of our nation's
precious natural resources in the west, only the General Mining Law of
1872 remains unchanged. One of the most egregious wrongs of the 1872
Mining Law is the fact that anyone mining in the West may take hardrock
minerals owned by the taxpayers and citizens of the Unites States for
free. Timber companies pay for the ability to cut trees on public land.
Ranchers pay for the ability to graze cattle on the western public
lands. Oil and gas companies pay a royalty of between 8 and 12% for the
ability to drill for oil and gas on our western public lands. Yet,
after 137 years, mining companies from all over the world are still
allowed to take a billion dollars worth of minerals from our public
lands every year.
S. 796 and S. 140 are both significant and important attempts to
correct this anachronism. We would like to see S. 140 incorporated, in
its entirety into S. 796. This would be a strong bill that would
protect our economic and national security while preserving our
precious natural heritage.
In Arizona, there is no better example of why we need to reform the
1872 Mining Law than a proposal by Augusta Resources, a Canadian
company who has never built or operated a mine in the 70 years they
have been in existence. They have submitted a plan to build a mine in
the Santa Rita Mountains just south of Tucson, Arizona. Called the
Rosemont Mine proposal, they are planning an open pit copper mine in
the heart of significant wildlife habitat and one of the prime areas
that folks from Tucson come to recreate. The mine is proposed in the
middle of one of the major watersheds the City of Tucson depends on for
their water supply. There is massive public opposition to the mine
proposal and virtually all elected officials in southern Arizona oppose
the mine. Yet because of the 1872 Mining Law, it will be very difficult
to stop this mine proposal. We urge the Committee to significantly
reform the 1872 Mining Law to stop the Rosemont and other ill conceived
and inappropriate mine proposals. We certainly use copper and other
minerals, but there are better ways to obtain these minerals than from
the Rosemont proposal.
s. 796, the hardrock mining and reclamation act of 2009
On April 2, S. 796, Senator Bingaman (D-NM) introduced the Hardrock
Mining and Reclamation Act of 2009, in the U.S. Senate. This bill is a
modest proposal to update this century old law. While S. 796 does not
go as far as the legislation that has been introduced in the House of
Representatives (HR 699), and passed the House in the 110th Congress,
the bill is a huge improvement over the status quo. While the Arizona
Mining Reform Coalition would prefer that S. 796 looked much more like
HR 699, we commend Senator Bingaman for starting the ball rolling and
hope that the bill can be strengthened as it moves through the Senate.
Title I--Mining Claim Location
Section 101 ends the patenting of mining claims and is
consistent with HR 699.
Section 102 raises the claim maintenance fees from $125 to
$150 and the location fee for new claims from $30 to $50. The
Secretary may adjust the claim maintenance fee every 5 years or
more often if necessary to take into account inflation, using
the Consumer Price Index.
Section 103 defines limitations on mining claims.

We support these reforms in the Senate bill.
Title II--Royalties
Section 201 sets a royalty rate of between 2 and 5% on the
value of production for new mines only after transportation,
beneficiation, and processing costs are deducted. The Secretary
of the Interior is authorized to set the precise rate by
regulation and the rate could vary based on the type of
mineral.
Section 202 would allow a mining company to ask the
Secretary of the Interior to reduce or remove the royalty if
the company can show ``clear and convincing'' evidence that
mining would not occur without the reduction.

The Coalition supports the approach taken in the House bill. HR 699
establishes a royalty of 8% on new mines and 4% on existing mines and
does not allow for exemptions or deductions from the gross value of the
mineral extracted. The Senate bill, by contrast, would not provide a
fair return to the federal treasury for mineral extraction on federal
lands. We are particularly concerned about Section 202, because it
provides a broad exemption for the mining companies to claim that they
cannot afford to pay the American public for mineral development on
federal lands.
Title III--mining activities
Section 301 requires a permit to engage in mineral
activities on public lands.
Section 302 requires a permit for anyone who wants to
explore for minerals, except casually in a way that does not
use mechanical means or disturb the surface (while allowing for
rockhounding, panning, and other casual uses without a permit).
Section 302(d)(1)(A) requires the Secretary of the Interior
to approve an exploration permit subject to compliance with
mining and other laws. However, Section 302(d)(2) allows the
Secretary to deny an exploration permit if mining or other laws
cannot be met.
Section 303 requires a permit for engaging in mineral
activities and sets the terms for mineral activities on public
lands (except casual use).

--Mining operators would be required to avoid acid mine drainage
(to the maximum extent practicable) but there is not a ban
on the creation of acid mine drainage. While this section
calls for a mining application to describe potential
impacts to ground and surface water, it does not require
hydrological balance or ban treatment in perpetuity as a
condition for granting of a permit.
--A mine permit can be denied if it violates mining or other
applicable laws. Under this section a mine permit is good
for 30 years and can be renewed.
--This section also allows the collection of land use fees for the
use of public lands by a mine. The fees would be collected
yearly, but the bill does not state for how long. Fees,
(including the claim maintenance fee) would be $37.50 per
acre.

Section 304 requires that an operator obtain some kind of
financial assurance before developing minerals on federal
lands.

--The bill allows the possibility of corporate guarantees, which is
weaker than existing policy for mineral development on
federal lands. The Secretary may, according to the bill,
allow incremental financial assurance instead of the entire
amount up front.
--This section requires public review of the bonding amount every 3
years over the life of the mine (expect in cases of
incremental bonding where the review would be every year.)
--A mining company may be required to set up a trust fund to fund
long term or perpetual water treatment.

Section 306 deals with operation and reclamation standards
for mineral activities on federal lands. The bill requires that
the mining company return land and water to pre-mining
conditions or other beneficial uses (including the generation
of renewable energy) after mining. This section requires the
Secretary of Agriculture to create regulations that prevent
unnecessary or undue degradation from mining on our national
forests (the Secretary of Interior already has this
obligation.)
Section 307 establishes a process for the Secretary of the
Interior to determine what lands should be available for
mining. It requires the Secretaries of Interior and Agriculture
to review most crucial public lands within 3 years and
determine, subject to valid existing rights, tracts of land
that should be withdrawn from mining. The Bill allows a
Governor, Tribal leadership, or local governments to petition
the Secretary for lands to be included in withdrawal, but
unlike the House bill, puts the burden of proof on the
petitioner rather than the Secretary.
Section 309 requires that mines be inspected at least once a
quarter.

The Coalition recognizes that these provisions are an
improvement over existing law, but they fall short of the kind
of protection needed for communities in Arizona, and are not
nearly as good as the House bill.
We recommend:

--A determination of the financial viability of a mining company be
included as part of the permitting process.
--A ban on any mine that causes acid mine drainage.
--Permits for mines should only be for 20 years.
--No mining should be allowed that cannot restore the hydrological
balance after mining.

The bill fails to mention the critical need for mines to
maintain the regional water balance.
The land use fees are insufficient to provide a decent
return to the taxpayer for the permanent alteration of the
land.
We oppose the loophole allowing corporate guarantees and
the use of incremental financial assurance. This provision
would allow mining companies to alter federal lands without any
insurance policy in place to protect the taxpayer from the
liability for that damage.
We are concerned that the federal land review ordered in
Section 307 would lead to a lengthy administrative process
similar to the RARE II review that took place on Federal lands
in the 1970's. In that instance, federal lands managers failed
to consider millions of acres of federal lands that should be
protected for their wildland values, and subsequently these
lands were damaged by overuse. We prefer the language in the
House bill regarding the right of a Governor, Tribal Leader, or
local government to petition for mineral withdrawal than this
language.
title iv hardrock minerals reclamation fund
Title IV establishes a fund for the cleanup of abandoned mine
lands, sets up the structure of the Fund, and the dispersal of monies
within the Fund for Abandoned mine cleanup.

Section 403 requires all hard rock mines to pay into the
Fund an annual reclamation fee of between 0.3 and 1.0% of the
value of production after the deduction of transportation,
beneficiation, and processing costs. The Secretary of the
Interior would set the exact amount.

We like this title generally although we would like to see higher
fees to put more money into the Fund for abandoned mine cleanup. As
with the royalty amount in Section 201, the fee outlined in Section 403
allows so many deductions that a clever mine would pay nothing into the
Fund.
Title V--Miscellaneous Provisions
This title is the ``cleanup'' title that adds everything else that
did not fit elsewhere. The two main features here are:

Section 504 eliminates a provision that allows certain
uncommon varieties of minerals to be governed by the 1872
Mining Law and would shift the management of these minerals to
the stricter leasing laws.
Section 505 would require a review of uranium development on
public lands that would be written by the National Academy of
Sciences under an arrangement with the Secretary of Interior
and the Secretary of Agriculture. The study would be completed
within 18 months after this bill was made law and would make
recommendations as to changes to Federal law and agency
regulations to allow for the production of uranium while
protecting public health and safety and the environment. The
study would determine if uranium should be removed from
operation under the 1872 Mining Law, what fees should be added
to insure reclamation of new and abandoned sites, and whether
additional lands should be withdrawn from uranium mining
claims.

We support these provisions.
s. 140, the abandoned mine reclamation act of 2009
Senator Diane Feinstein (D-CA) introduced this bill on January 6,
2009.
What the bill does is to set up an Abandoned Mine Clean-up Fund
that would be funded by new and current mines on public lands, by mine
claim fees and by a reclamation fee on all mine whether on public or
private lands.

We support this bill.
Title I--Mineral Exploration and Development
Section 101 sets up a royalty structure for new and existing mines
on public lands. All new mines that have not been permitted before
passage of this bill would pay a royalty of 8% on the gross income from
mining. This is very similar to the new mine royalty provision in HR
699 (the Rahall Bill). All existing mines will pay a royalty of 4%,
again similar to the Rahall Bill.
Section 102 raises the annual claim maintenance fee (currently at
$140) to $300 per year. In addition, the claim location fee and the
claim transfer fees are also raised. This section allows the Secretary
of Interior to adjust these fees to reflect changes in the Consumer
Price Index. The Secretary shall adjust the fees every 5 years or more
frequently if needed.
Section 103 sets up a reclamation fee. This requires every operator
of a Hardrock mine in the United States to pay a reclamation fee of
0.3% unless the annual income of the mine is less than $500,000.
Section 104 gives the owner of a mining claim authority to use the
mining claim for prospecting and exploration if the claim maintenance
fee is paid in a timely manner.

These changes are long overdue. For too the United States has
given away its hardrock resources for free while enduring a
huge clean-up burden that in many cases far outweighs the total
economic benefit from the minerals mined. These fees and
royalties are competitive and not overly burdensome on the
mining industry while creating a mechanism for putting
Americans to work cleaning up a 137 year legacy of pollution
and neglect. Since mining companies, like all Americans are in
favor of environmental safeguards and cleaning up old
pollution, one would think they would embrace these costs as
the way of doing business in our new American economy.
Title II--Abandoned Mine Cleanup Fund
Section 201 sets up the fund and requires that monies in the fund
be prudently invested while they are awaiting use.
Section 202 allows donations, royalties from Section 101, fees from
Section 102, and the reclamation fees from section 103 to be deposited
in the Fund.
Section 203 allows the Secretary of interior to use monies in the
Fund to reclaim and restore land and water resources adversely affected
by past mining activities on federal lands. It allows other land within
the boundaries of any national forest system unit that is not federal
land to also be cleaned up with Fund money. It allows lands managed by
the BLM to be cleaned up using the Fund. In addition, it allows mines
that are at least 50% located on public land to be cleaned up using the
Fund.
Section 204 says which lands are eligible to use money from the
Fund. Only abandoned mines that were not reclaimed before the enactment
of this bill and for which no responsible mine owner or operator can be
found.
Section 205 says that money in the Fund will be disbursed by the
Director of the Office of Surface Mining Reclamation and Enforcement.
The Director can spend the money directly or make it available to the
BLM, the Forest Service, the Park Service, the US Fish and Wildlife
Service, any other Federal agency, any Indian Tribe, to any other
public entity has the ability of carry out a reclamation program.

This bill is silent on the question of the degree of clean up
that is required or allowed. While we understand that the bill
was meant to be a clean look at one piece of the reform
``pie,'' some clarity to make sure that if funds are spent for
clean up that the cleanup effort would meet the full
requirements of all US environmental protection laws.
Title III--Effective date
Section 301 says that this Act will take effect immediately upon
its being signed into law.

The sooner these provisions can take effect, the better!
______

Submission of Save the Scenic Santa Ritas (www.scenicsantaritas.org)
[Save the Scenic Santa Ritas has submitted the following documents,
which are retained in Committee files:]

1. Copies of resolutions passed by local government entities
opposing the proposed Rosemont mine.
2. A list of Southeast Arizona organizations and businesses
that oppose the mine.
3. News stories and editorials from local newspapers.
4. Save the Scenic Santa Ritas press releases and opinion
pieces published in local newspapers.
5. A Save the Scenic Santa Ritas brochure.
______

Statement of the Environmental Working Group, on S. 796
Environmental Working Group commends Senator Jeff Bingaman on the
introduction of the Hardrock Mining and Reclamation Act of 2009 and for
his leadership on this important issue. This bill marks the first
serious effort to reform the 1872 Mining Law in the Senate since 1994.
The legislation would help move our mining law into the 21st
Century by implementing a first-ever royalty and reclamation fee for
hardrock mining and by creating an abandoned mine cleanup fund. The
fund would help create jobs in rural communities to mitigate the boom/
bust cycle of mining and would help address the estimated $20-$55
billion cleanup cost of abandoned mines. The legislation would put a
permanent end to patenting--a giveaway under which mining interests
have been able to privatize public land for as little as $2.50 an acre.
Mining reform is long overdue. Mining has been the United States'
leading source of toxic pollution for nine consecutive years according
to the Environmental Protection Agency's Toxics Release Inventory.
According to our analysis of Bureau of Land Management (BLM) records,
the number of mining claims on federal land has surged from 207,540 in
January 2003 to 451,463 in January of 2009. Any of these claims could
be developed into a mine including thousands of claims near communities
and National Parks. The impacts to people, water and wildlife could be
catastrophic. And yet, the industry continues to operate largely under
a law signed by President Ulysses S. Grant in 1872 that treats mining
as the highest and best use of federal land.
We urge the committee to pass comprehensive mining reform. While
Sen. Bingaman's bill is a significant step forward, the committee
should work to strengthen the legislation by ensuring that reform
includes the following provisions:

Balance mining with other interests: Land managers should
have the ability to balance mining with other resources such as
water quality. Currently, land managers take the position that
they must approve mining no matter the impacts on other
resources. Managers must have the ability to determine in some
cases that mining in not appropriate just as they can with oil,
natural gas and other extractive industries.

The situation near Grand Canyon National Park highlights this
concern. In December 2007, the Forest Service approved a British
company's plan to conduct exploratory drilling for uranium as close as
two miles to the park. ``The 1872 Mining Law specifically authorizes
the taking of valuable mineral commodities from Public Domain Lands,''
the service wrote in justifying its decision. ``A `No Action'
alternative is not an option that can be considered.'' As of January
2009, there were 1,165 mining claims within five miles of the park, any
one of which could be developed. This spring, the BLM gave the green
light for a Canadian company to conduct exploratory drilling near the
park.
The Bingaman bill takes a step forward by applying a standard to
all federal lands that land managers must prevent ``unnecessary or
undue degradation'' resulting from mining. However, federal land
managers' deferential stance toward mining on public lands and
testimony presented to the committee last year from former BLM and
Forest Service Chief, Mike Dombeck, suggests that this standard is not
strong enough to empower land managers to say no to a mine. The
committee should work to strengthen this standard.

Protect special places: Mining companies should generally be
allowed to operate on federal lands, but some places should be
off-limits to claims. These places include Forest Service
Roadless Areas, Wilderness Study Areas, lands designated for
inclusion in the Wild and Scenic River System, and lands
petitioned for withdrawal from mining by tribal, state or local
governments.

Once a claim is staked in these areas, taxpayers may have to spend
millions to prevent mining. In 1996, the federal government paid $65
million to buy out patented claims just three miles from Yellowstone
National Park that would have been the site of a major gold mine. The
mine would have been located at the headwaters of three streams that
flow into the park.
The Bingaman bill would help protect special places by authorizing
a study of the areas mentioned above with the provision that the
Secretary may put them off-limits to mining following completion of the
study. The committee should go further and place these sensitive areas
off-limits to claims.

Tougher standards for mine permits and cleanup: Mining
companies should not be able to receive a mining permit if
their mines would require perpetual water contamination or
where operations would impair the resources of National Parks
or Monuments. Companies should also put up enough money before
operations begin to cover the full costs of cleanup should the
company go bankrupt or abandon the site.

The Bingaman bill would help improve mining standards by allowing
the government to order creation of a long-term fund for water
treatment for each mine. The bill also provides that the government may
not release any bonds that cover the cost of cleanup until any
discharge of water from the mine has ceased for at least five years or
the mine operator has met all discharge limits and water quality
standards for at least five years. These standards should be
strengthened with requirements that no permit shall be issued until
companies can establish that their operations will not result in
perpetual water treatment or harm to National Parks or Monuments.

An end to mining's tax break: In addition to being able to
mine royalty-free, mining companies can claim a tax break on up
to 22 percent of the income that they make off hardrock
minerals mined on federal public lands. Though this issue is
outside the committee's jurisdiction, committee members should
join with other members of Congress to close this loophole.

Mining provides materials essential to our economy, but it must be
conducted in a way that strikes a balance with other values. We look
forward to working with the committee to ensure that mining on our
public lands is conducted in a responsible manner.
______

Statement of Laura Skaer, Executive Director, the Northwest Mining
Association, Spokane, WA, on S. 796 and S. 140
The Northwest Mining Association (NWMA) appreciates the opportunity
to provide the following statement to the committee for the hearing
record. The timing of this hearing on these two bills, following
committee passage of the ``American Clean Energy Leadership Act of
2009,'' is appropriate because how you choose to amend the Mining Law
will determine whether the vision and goals of the American Clean
Energy Leadership Act of 2009 will be achieved. Building America's
clean, renewable energy infrastructure and achieving energy
independence will require minerals and lots of them--minerals we have
in America.
If you choose to modernize the Mining Law in a way that provides a
fair return to the public while preserving certainty and land tenure
rights, and encourages private investment in finding, developing and
producing domestic mineral resources, you will take an important step
toward energy independence and a clean energy future. However, if you
enact the changes proposed in S. 796 and S. 140, you will create
uncertainty, discourage private investment in U.S. minerals, impede the
development of America's renewable energy infrastructure, export tens
of thousands of high paying mining jobs and trade an unhealthy
dependence on foreign oil for an increased, unhealthy reliance on
foreign sources of minerals.
This statement will address these issues in detail and provide
recommendations for modernizing the Mining Law in a way that will help
America achieve a renewable energy future, preserve and create high
paying jobs, stimulate economic recovery and decrease America's
reliance on foreign sources of minerals.
northwest mining association--who we are
NWMA is a 114 year-old non-profit mining industry trade association
with offices in Spokane, Washington, and 1,650 members residing in 40
states. Our members are actively involved in exploration, mining, and
reclamation operations on BLM and USFS administered land in every
western state, in addition to private, land grants and tribal lands.
Our membership represents every facet of the mining industry including
geology, exploration, mining, reclamation, engineering, equipment
manufacturing, technical services, and sales of equipment and supplies.
Our broad-base membership includes many small miners and exploration
geologists as well junior and large mining companies. More than 90% of
our members are small businesses or work for small businesses.
Our members have extensive first-hand experience with locating
mining claims, exploring for mineral deposits, finding and developing
mineral deposits, permitting exploration and mining projects, operating
mines, reclaiming mine sites, and ensuring that exploration and mining
projects comply with all applicable federal and state environmental
laws and regulations.
NWMA's members have extensive knowledge of the Mining Law of 1872,
The Federal Land Policy and Management Act (FLPMA), The Surface
Resources Act of 1955, administrative and judicial decisions
interpreting those laws, and the USFS and BLM Surface Management
Regulations governing hardrock mining operations on federal public land
(the 228 and 3809 Regulations respectively), as well as the multitude
of laws, rules and regulations of the various States that are applied
to mineral activities on public lands.
indispensable to energy independence & economic recovery
Hardrock mining is essential to America's clean energy future. A
plain and simple fact is that American renewables need American metals
and minerals--unless, of course, we are willing to trade our unhealthy
dependence on foreign oil for a dangerous dependence on foreign sources
of critical minerals. Plans to aggressively expand our renewable energy
production will require significant amounts of copper, steel,
molybdenum, zinc, gold, silver, cobalt, lead, uranium and rare earth
minerals. For example, wind turbines such as the Vestas V90--3.0 MW
require approximately 335 tons of steel; 4.7 tons of copper; 3 tons of
aluminum; 13 tons of glass fiber; 1,200 tons of reinforced concrete;
and 2 tons of rare earth minerals. Also, hybrid vehicles require at
least 50% more copper than the average car, and the motor requires rare
earth minerals.
No renewable energy project, including wind turbines, solar panels,
or fuel efficient cars can move forward without metals and minerals
that are produced, or could be produced, from mines in the United
States. This point is clearly made in the attached peer-reviewed
article, You Say Alternatives Are The Answer . . .Let's talk: Resource
Constraints on Alternative Energy Development, by James R. Burnell,
Minerals Geologist with the Colorado Geological Survey.* The article
discusses 18 ``Hot List Commodities'' needed for alternative energy
development and states that although the U.S. has deposits of many of
these minerals; our country relies on imports for nearly all of the
minerals required for building our renewable energy infrastructure.
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* All attachments have been retained in committee files.
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Mr. Burnell concludes that:

1. Most alternative energy technologies require scarce
strategic metal for their fabrication and operation.
2. Increasing use of these technologies will be constrained
by global supply and price issues with the metals.
3. Policy makers in the U.S. should consider a constructive
attitude toward exploration and development of strategic
commodities necessary for ``green'' energy. The move toward
some degree of self-sufficiency for these commodities would not
only help the U.S. balance of trade, but provide good jobs in
mining and a stronger possibility for jobs manufacturing
renewable energy hardware domestically rather than importing
it.
4. Discussions about increasing ``green'' energy are
generally inconsistent with anti-mining policies.

In addition, a healthy and vibrant domestic mining industry is
indispensable to our economic recovery. Mining creates new wealth and
provides the high-paying family wage level jobs with good benefits our
country desperately needs. Moreover, the indirect employment multiplier
for the mining industry is twice the national average. In 2007 (the
latest year for which statistics are available), the U.S. mining
industry provided:

Direct jobs--376,310
Indirect jobs--1,079,400
Total mining payroll--$22.1 billion, generating $64.6
billion throughout the economy
$98.4 billion of finished mineral, metal and fuel products;
building block materials that were further transformed into
consumer and industrial goods creating an additional $1.8
trillion in value added products.

Mining supports the very foundation of our economy. The $787
billion stimulus package passed by Congress and signed by President
Obama includes a public works initiative to upgrade our nation's
infrastructure that will require metals and minerals. Indispensible
components of our infrastructure include steel, copper, industrial
minerals, molybdenum and iron ore. No infrastructure project, including
bridges, buildings or transportation, in fact, no society can move
forward without metals and minerals.
Unfortunately, S. 796 and S. 140 will frustrate or prevent the
domestic mining industry from providing metals, minerals and jobs
necessary for energy independence and economic recovery. Any claims
that renewable energy development will lessen our reliance on foreign
oil ring hollow if the Nation becomes more reliant on foreign sources
of the metals and minerals necessary to build our renewable energy
infrastructure, including but not limited to, wind turbines, solar
panels, hybrid vehicles and transmission lines. Regrettably, as
drafted, S. 796 and S. 140 are guaranteed to increase our reliance on
foreign sources of the critically important metals and minerals.
Therefore, in considering these bills, Congress must ask and answer
questions such as the following:

Do we want to get the rare earth minerals needed for wind
turbines and hybrids from California?

Do we want to import the rare earths from China?

Do we want to get the copper needed to build wind turbines
and hybrid vehicles from Arizona and Utah?

Do we want to import the copper from Peru, Chile, and Mexico?

Do we want to get the gold and silver we need for electronic
and medical equipment from Nevada, Idaho, Colorado, and Alaska?

Do we want to import the gold and silver from China, South
Africa, and Australia?

The U.S. can and should be more self-reliant for the minerals we
need. Despite reserves of 78 important mined minerals, the United
States currently attracts only seven percent of worldwide exploration
dollars. As a result, our nation is becoming more dependent upon
foreign sources to meet our metal and minerals requirements, even for
minerals with adequate domestic sources.
Currently, America is 100 percent dependent on foreign sources for
18 minerals commodities and more than 50 percent import reliant on
another 45 commodities. Increased import dependency causes a multitude
of negative consequences, including aggravation of the U.S. balance of
payments, unpredictable price fluctuations, loss of high paying jobs
and vulnerability to possible supply disruptions.
Our over-reliance on foreign supplies is exacerbated by competition
from the surging economies of countries such as China and India. As
these countries continue to evolve and emerge into the global economy,
their consumption rates for mineral resources are ever-increasing; they
are growing their economies by employing the same mineral resources
that we used to build and maintain our economy. As a result, there
exists a much more competitive market for global mineral resources.
Furthermore, S. 796 fails to recognize the evolution of the mining
industry from its pick and shovel days to the highly regulated,
technologically advanced and environmentally responsible industry that
it is today. Much has changed since 1969 (when NEPA was enacted as our
first modern federal environmental law), with regard to federal and
state environmental regulations governing hardrock mining and financial
assurance requirements. The USFS adopted their 36 CFR 228A regulations
in 1974, updated them in 2005, and issued financial assurance
guidelines in 2004. The BLM promulgated its 43 CFR 3809 regulations in
1980 and updated them in 2000 and 2001. Congress has enacted a plethora
of environmental laws applicable to hardrock mining beginning with NEPA
in 1969, and every public land state has enacted comprehensive
environmental laws and regulations for hardrock mining, including
requirements for mined land reclamation secured by financial assurance.
One state alone, Nevada, currently holds more than $1 billion in
financial assurance.
S. 796 assumes a state and federal regulatory vacuum that simply
does not exist. S. 796 ignores the fact that the U.S. has the highest
environmental standards and the most stringent regulations in the
world. It ignores the fact that existing environmental laws,
regulations, and financial assurance requirements protect the
environment, ensure public participation in the process and ensure that
modern mines are reclaimed and do not become tomorrow's abandoned
mines.
Congress should not enact laws like S. 796 and S. 140 that
discourage private investment in mineral development or unduly burden
existing production with royalties, taxes and fees. S. 796 and S. 140
will result in premature mine closures, job losses and economic
devastation of rural communities. In addition, these bills will
increase our reliance on foreign sources of minerals from countries
that may be hostile to our economic and national security interests,
such as China, Russia, and Venezuela, and do not require the
environmental protections we demand in America.
The efforts to build a renewable energy infrastructure, rebuild and
expand our nation's infrastructure, energy production and transmission
grid shine a spotlight on the need to develop the Nation's mineral and
energy resources on both public and private lands and to streamline our
permitting and regulatory processes. In order to get Americans working,
the Administration and Congress must streamline the regulatory burden
and prioritize funding for permitting functions of federal regulatory
agencies so that mineral development projects are reviewed and
permitted in a timely manner without sacrificing important
environmental protections. Unnecessary delays jeopardize projects and
inhibit investment, economic expansion and job growth. Over-burdensome
bureaucratic processes frustrate job creation and are detrimental to
economic recovery.
It is more important than ever for the United States to responsibly
utilize our own mineral and energy resources. In fact, our economic and
energy security depends on it. The U.S. mining industry stands ready to
provide the jobs and materials needed to build our renewable energy
infrastructure and lead this nation out of recession and into mineral
and energy independence. However, S. 796 and S. 140 are
counterproductive to a healthy and vibrant domestic mining industry,
economic and energy security, and will not only frustrate job creation
but eliminate current high-paying jobs, often exporting them to foreign
countries.
America's Requirements for an Amended Mining Law
America continues to need a Mining Law that promotes responsible
development of the Nation's mineral resources by private investors to
ensure our energy, economic, and national security, contribute to
economic recovery and improve the balance of trade while preserving and
increasing family-wage mining jobs; a Mining Law that reduces
uncertainty, creates a fair, simple to administer royalty and ensures
the right to enter and use and occupy public lands open to location for
the entire life cycle of a mining project and a Mining Law that takes
advantage of the comprehensive and effective state and federal
regulatory framework for environmental protection. For reasons already
discussed and outlined further below, S. 796 and S. 140 fall woefully
short in meeting these objectives and the needs of our country.
However, as demonstrated by the attached table, with four
exceptions that need to be addressed in an amended Mining Law, the 1872
Mining Law, though 137 years old, still meets the key requirements for
a successful mining law. Objectives like providing a stable business
climate, reducing uncertainty, promoting private investment in finding
and developing mineral resources on public lands, preserving and
increasing family wage level jobs and guaranteeing land tenure rights
from entry through closure and reclamation. Objectives that were
reaffirmed by Congress when it passed the Mining and Minerals Policy
Act of 1970 and the Federal Land Policy and Management Act (FLPMA) of
1976 and are met with existing law.
The 1872 Mining Law provided the legal framework and incentive for
private investors to search for, find, and develop the minerals that
built America--our railroads, highways and buildings; the metals that
electrified the nation; and the metals and minerals that helped win two
world wars. And, as mentioned above, twice in the past 40 years,
Congress has reaffirmed the purpose of the Mining Law and a primary
purpose of our public lands--to meet the mineral needs of our Nation
through private enterprise. That need is as great today as it was 137
years ago. Our highly technological society and desire to develop a
renewable energy infrastructure requires minerals, and lots of them.
Notwithstanding the success of the current law, NWMA strongly
supports surgical, common-sense amendments to the Mining Law that
address the well recognized short comings in the current law--the lack
of an appropriate royalty to provide a fair return to the people; the
need for a tenure security provision to replace patenting; a funding
mechanism to reclaim historic abandoned mines; and Good Samaritan
protection to encourage reclamation of historic abandoned mined lands
(AMLs). An amended Mining Law also must ensure a miner's rights to
enter upon, use, and occupy public lands to explore for, find and
develop mineral deposits. And, an amended Mining Law should recognize
and use the existing environmental regulatory framework for mineral
activities that the National Research Council in 1999 found to be
generally effective in protecting the environment.
Unfortunately, there is nothing surgical or common-sense about S.
796 and its approach to amending the Mining Law. It fails to accomplish
the key requirements for a well functioning Mining Law, will create
uncertainty, and by repealing the current Mining Law, throws the baby
out with the bath water. The Mining Law does not require a major
overhaul. It only needs a minor tune-up. Set forth below are NWMA's
recommendations for amending the Mining Law and a discussion of some of
the major problems with S. 796 and S. 140.
nwma recommendations for amending the mining law
NWMA urges Congress to enact Mining Law amendments that will reduce
America's reliance on foreign minerals; provide domestic sources of the
minerals needed for America's renewable energy infrastructure and its
national and economic security; create thousands of high paying family-
wage jobs; and strengthen the economy in rural communities throughout
the West. Specifically, NWMA believes responsible Mining Law
legislation should accomplish the four objectives outlined below:
Provide Security of Land Tenure
If Mining Law amendments are going to eliminate the rights of
mining claimants to patent mining claims with a discovery of a valuable
mineral deposit, then the legislation must provide secure rights to
enter public lands and to use and occupy those lands for the purpose of
making a mineral discovery and developing a mine. Security of land
tenure is needed throughout the entire mineral life cycle of entry,
location, prospecting, exploration, development, mining, and
reclamation in order to attract investment capital for exploration and
mine development and to support business investment decisions to build
a mine.
The only way the country will benefit from a continuous and robust
future stream of royalty payments will be to maintain a pipeline of new
discoveries that eventually become future mines. To achieve this
important objective, public lands must remain open to exploration and
development. This means that the Mining Law must provide a right of
entry and access on lands open to the operation of the Mining Law and
the right to use and occupy public lands for mineral purposes
throughout the mineral lifecycle of exploration, development, mining
and reclamation. Of course, these mineral activities must be conducted
in compliance with laws and regulations to protect the environment and
to reclaim the land.
Thus, NWMA believes that an amended Mining Law must preserve the
Mining Law rights of self initiation and entry at 30 U.S.C. '22 to
enter and occupy public lands open to location to prospect and explore
for locatable minerals and to locate mining claims. Once a mining claim
has been located, security of tenure and all rights to use and occupy
federal lands for mineral purposes should be tied to the payment of the
initial claim location fee and the annual claims maintenance fee. There
should be no other fees or fair market value assessment for mineral
activities on federal lands.
Royalty
Congress should enact a royalty that provides the public fair
compensation for minerals produced from future discoveries while
allowing reasonable deductions to produce a marketable product.

The royalty must be structured to consider the entire cost
burden of state and federal income taxes, sales taxes, and
other taxes, and not be so high that it becomes impossible for
companies to recover the significant capital cost and upfront
investment in exploration and mine development. Attached hereto
and incorporated by reference is the 2009 Country Ranking Study
by Behre Dolbear. This study indicates that countries with a
greater than 50% government take are unfavorable to mining,
expresses concern about the 35% U.S. corporate tax rate and
gives the U.S. a ranking of 5 out of 10 on the basis of an
unfavorable existing tax regime and concerns that it will get
worse due to the enactment of a federal royalty.
The royalty must also consider that underlying private
royalties burden most mining claims. The combination of federal
plus private royalties must not make mines unprofitable because
unprofitable mines will close prematurely or never be built in
the first place. Royalties will not be realized at closed mines
or mines that are not built. In addition, the royalty must not
diminish the revenue from state mineral taxes and severance
taxes on which state and local governments depend.
The royalty must be prospective. Assessing the royalty on
existing mining claims on which there has been substantial
investment in reliance on existing law may subject the United
States to substantial takings litigation. The courts, including
the U.S. Supreme Court, have recognized that valid unpatented
mining claims are exclusive possessory interests in federal
land for mining purposes which entitle claim holders to extract
and sell minerals ``without paying any royalty to the United
States as owner.'' Union Oil Company v Smith, 249 U.S. 337,
348-49 (1919). ``Even though title to the fee estate remains in
the United States, these unpatented mining claims are
themselves property protected by the Fifth Amendment against
uncompensated takings.'' Kunkes v United States, 78 F.3d 1549,
1551 (Fed.Cir.1996). This position is more fully explained in
the attached legal memorandum prepared by Beveridge & Diamond
pc, attorneys at law. This memorandum is incorporated by
reference as though fully set out herein.
Mine operators and not owners, co-owners, or underlying
royalty owners should be liable for paying the royalty. This is
analogous to the collection of federal royalties on coal and
oil and natural gas. The Minerals Management Service (MMS) has
significant experience collecting royalties from coal operators
and oil and gas operators. Thus, placing the royalty liability
on mine operators will simplify administration of hardrock
royalties by MMS.
Abandoned Mine Land Reclamation
All royalties collected from hardrock mineral production should be
used to reclaim historic abandoned mine lands. There is no need for a
new federal AML program. Existing state, BLM, USFS, and Army Corps of
Engineers (RAMS) AML programs have proven track records of successfully
reclaiming AML sites. Rather, the legislation should create a hardrock
AML fund, and all monies should be distributed to existing federal and
state AML programs without the requirement of an annual appropriation.
The fund also should allow for donations by persons, corporations,
associations and foundations, and other monies that are appropriated by
the Congress of the United States.
It is important to recognize that the AML problem is a finite and
historical problem and not one that will grow in the future. Most AMLs
predate the passage of NEPA, federal and state environmental laws and
the establishment of federal and state hardrock mining regulatory
programs. The few exceptions occurred during a time when federal and
state hardrock mining regulatory programs were in their infancy and
reclamation and financial assurance requirements consisted primarily of
re-grading and re-vegetation. In those early years, closure and
reclamation requirements were not based on detailed modeling of likely
long-term water quality impacts, and did not include comprehensive
financial assurance requirements based on those models. Today, they do.
Since 1974, federal and state financial assurance requirements for
hardrock exploration and mining projects have evolved to ensure that
today's reclamation bonds are comprehensive and conservative. In
addition, over the last 25-35 years, the BLM, the USFS and every
western state with hardrock mining activities have enacted
environmental laws and regulatory programs for hardrock mineral
activities. These regulatory programs work together with today's
reclamation bonding and financial assurance requirements to ensure that
today's mines will not become future AML sites.
The attached NWMA White Paper entitled ``The Evolution of Federal
and Nevada State Reclamation Bonding Requirements for Hardrock
Exploration and Mining Projects'' documents how federal and state
regulators have used existing regulatory authorities to respond to and
eliminate short comings in the reclamation bonding program. This paper
demonstrates that federal and Nevada regulators, with the mining
industry's full participation and concurrence, have significantly
improved and expanded reclamation bonding requirements in the last 5
years based on the lessons learned at mine bankruptcy sites in the
90's. This paper further documents that current reclamation bond
requirements are comprehensive and conservative and consider all likely
contingencies based on agency costs to implement, manage, and complete
reclamation of sites requiring government intervention. This White
Paper is incorporated by reference as though fully set forth herein.
It also is important to understand that the vast majority of
hardrock AML sites are not problematic. A 1998 Western Governors
Association (WGA) report estimated that more than 80% of AML sites
create neither environmental nor immediate safety hazards. Where
problems do exist, safety hazards are the primary problem although some
AML sites have both environmental and safety issues.
The Center of the American West released a study in 2005 entitled
``Cleanup of Abandoned Hardrock Mines in the West.'' The Center, which
is affiliated with the University of Colorado, states at page 31 of its
report that ``only a small fraction of the 500,000 abandoned mines
[identified by the Mineral Policy Center] are causing significant
problems for water quality.''
In 2007, the USFS and BLM published a report entitled Abandoned
Mine Lands: A Decade of Progress Reclaiming Hardrock Mines. This report
estimates that there are approximately 47,000 abandoned mine sites on
more than 450 million acres of federal land managed by those two
agencies. This report estimates that as many as 10% of the AML sites on
USFS-or BLM-managed land may include environmental hazards and that the
balance, or approximately 90%, are landscape disturbances or safety
hazards. The finding that landscape disturbance and safety hazards
comprise the bulk of the AML problem is consistent with other reports.
Although much of the public debate about the AML problems typically
focuses on environmental issues, it is really safety hazards that
deserve our immediate attention. Nearly every year, the country
experiences one or more tragic accident or fatality at an AML site
where somebody has fallen into or become trapped in an unreclaimed
historic mine opening. AML safety hazards pose a far greater risk to
the public than AML environmental problems. Therefore, we should focus
first-priority AML funds on eliminating safety hazards at abandoned
mine sites located near population centers and frequently used
recreation areas.
The Need for Good Samaritan Protection
While some progress has been made by industry and existing State
and federal AML programs in reducing safety hazards and remediating and
reclaiming hardrock AMLs, the number one impediment to voluntarily
cleanup of hardrock abandoned mine lands is the potential liability
imposed by existing federal and state environmental laws, in particular
the Clean Water Act (CWA), the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) (commonly known as Superfund),
the Resource Conservation & Recovery Act (RCRA), and the Toxic
Substances Control Act. Under these laws, a mining company, state or
federal agency, NGOs, individuals or other entities that begin to
voluntarily remediate an abandoned mine site could potentially incur
``cradle-to-grave'' liability under the CWA, CERCLA, and other
environmental laws, even though they did not cause or contribute to the
environmental condition at the abandoned mine land site.
Furthermore, they could be required under the CWA to prevent
discharges to surface waters from the AML in perpetuity, unless those
discharges meet strict effluent limitations and do not result in
exceedences of stringent water quality standards, something that may
not be possible; and in any event, may be so expensive that no company,
individual, or other entity would undertake a voluntary cleanup.
Virtually everyone who has looked at the AML issue in the west has
recognized and documented the legal impediments to voluntary cleanup of
AMLs and has urged that those impediments be eliminated. These groups
include the Western Governors Association, the National Academy of
Sciences, and the Center for the American West.
In order to improve the effectiveness of any AML reclamation
effort, the legislation should include effective Good Samaritan
language that will create a framework, with incentives and liability
protection for numerous entities, including mining companies, local,
state and federal agencies, NGOs, and tribes, to voluntarily remediate
historical environmental problems caused by others at abandoned
hardrock mine sites in the United States. Several Good Samaritan bills
have been introduced in the past, but only S. 1848, introduced in 2006
by Senators Salazar and Allard, passed out of committee. We strongly
supported, and continue to support the Salazar/Allard approach to Good
Samaritan legislation and believe that approach should be included in
Mining Law Reform legislation.
NWMA provided testimony on AML issues at the October 2, 2007 House
Energy and Mineral Resources subcommittee legislative hearing on H.R.
2262 and the March 12, 2008 Senate Energy and Natural Resources
oversight hearing. A copy of both testimonies is included with this
statement and incorporated by reference as though fully set forth
herein.
At the March 12, 2008 Senate Energy & Natural Resources Committee
oversight hearing, NWMA presented a chart which demonstrates that there
were more than 120 years of hardrock mining in the U.S. before the
first environmental law was enacted. The subcommittee should carefully
study this chart. It will demonstrate clearly that the AML problem is
historic.
Environmental Standards and Regulations
Mining Law amendments must recognize that existing federal Surface
Management Regulations (BLM 43 CFR 3809 and USFS 36 CFR 228)--coupled
with the country's framework of federal and state environmental
statutes and regulations that apply to all industries, including
mining--effectively protect the environment. Operations under the
Mining Law are subject to all applicable federal and state
environmental laws and regulations. Mining does not get an ``olly,
olly, oxen free'' under the Clean Water Act, the Endangered Species Act
or any other applicable environmental law and regulation. Federal land
managers have an absolute right and duty to say ``no'' if a mining
proposal will not comply with all applicable state and federal
environmental laws and regulations. If a mining proposal cannot meet
Clean Water Act standards, the mine does not get a permit to operate.
Federal land managers and regulators tell mining companies ``no'' all
of the time. They require changes in the Plan of Operation, and they
require significant efforts to ensure there will be no water quality
violations. The current regulatory framework is working to protect the
environment.
Furthermore, the current National Environmental Policy Act (NEPA)
review and public participation process provides an effective tool for
gathering public comments that influence regulators' decisions about
project proposals. The existing federal and state environmental laws,
regulations, environmental protection standards and the NEPA process
work together to provide federal and state regulators with stringent
and comprehensive regulatory authority to effectively regulate all
aspects of mineral projects and to comply with land management goals.
In 1999, the National Academies of Science, National Research
Council, published a report entitled Hardrock Mining on Federal Land.
This report was prepared at the direction of Congress to determine if
federal and state environmental laws and regulations were effective in
protecting the environment. The report concluded that ``[t]he overall
structure of the federal and state laws and regulations that provide
mining-related environmental protection is complicated, but generally
effective.'' The report identified five regulatory gaps which were
filled when BLM updated their 3809 regulations in 2001. S. 796 treats
these ``gaps'' as if they remain unfilled. No new or different
regulations, environmental performance standards or financial assurance
requirements are needed.
s.796 and s. 140 fail to meet industry objectives and the nation's
requirements for an amended mining law
``The Hardrock Mining and Reclamation Act of 2009'' (S.796) has
many fatal flaws that will create uncertainty for the mining industry,
discourage investment in U.S. mining, impede economic recovery, lead to
the loss of high-paying mining jobs bringing severe economic hardship
to countless mining-dependent communities, and result in an increased
reliance on foreign sources of minerals and metals.
While Senator Bingaman's bill may appear to be a more moderate
approach to updating the Mining Law than H.R. 699, a careful reading
reveals that it is a ``Trojan horse'' that will create serious problems
for the Nation if it becomes law. Also, several of these flaws apply to
S. 140. Here's why:

Both S. 796 and S. 140 decimate security of land tenure by
eliminating the rights to use and occupy public land for
mineral purposes which will thwart exploration and development.

--Eliminating pre-discovery rights to enter, use and occupy public
lands open to mineral entry creates intolerable uncertainty
because exploration becomes a discretionary use of public
land where permission to explore can be revoked at any
stage. This loss of pre-discovery rights significantly
increases the risks associated with mineral exploration and
will lead to a substantial decline in mineral discoveries
and future mineral production.
--Eliminating the right to use and occupy non-mineral public lands
for ancillary facilities such as processing facilities,
unmineralized rock storage areas, roads, etc., and making
these uses discretionary, also creates intolerable
uncertainties which will thwart mine development.
--Before substantial investments will be made to explore and
develop mineral deposits, miners must know that their
rights to enter, use and occupy public lands open to
mineral entry are secure from entry through mine closure.

S. 796 eliminates notices for exploration, failing to
recognize exploration's limited, short-duration surface
disturbance and replaces notices with a burdensome exploration
permitting process (Sec. 302).

--The resulting downturn in exploration will lead to a dramatic
decline in discoveries of new mineral deposits and will
significantly reduce future domestic mineral production. *
The language conflicts with the recommendations of the
National Research Council.
--S. 796 contains vague and uncertain royalty provisions that leave
the most critical details to a long and uncertain
rulemaking process, including the exact amount of the
royalty; the precise nature of deductions that are
reasonably associated with beneficiation, processing and
transportation; the standard to be used to determine the
royalty rate; and who is responsible for payment of the
royalty (Sec. 201-Sec. 203).

--The resulting economic uncertainty will inhibit or freeze
investment until the rulemaking is complete and damage U.S.
mining industry competitiveness in the global marketplace.
--Assessing the royalty on existing mining claims on which there
has been substantial investment in reliance on existing law
may subject the United States to substantial takings
litigation.
--Under the expanded royalty obligations, each person liable for
royalty payments is to be jointly and severally liable for
royalty on all locatable minerals lost or wasted, inviting
the government to make economic decisions concerning
mineral deposits that only a miner is capable of making.

Similarly, S. 140's 4% gross royalty on mines with current
commercial production and 8% gross on new mines will result in
premature closure of existing mines and make future mines
uneconomic, resulting in an unhealthy increased reliance on
foreign sources of minerals, a loss of high paying family wage
jobs and bring severe economic hardship on mining-dependent
rural communities. Furthermore, assessing the royalty on
existing mining claims on which there has been substantial
investment in reliance on existing law may subject the United
States to substantial takings litigation.
S. 796 prohibits any person or related party from relocating
a mining claim, millsite or tunnel site for 10 years after a
claim or site is dropped or becomes null and void regardless of
the reason and provides no right to cure an oversight or error
on the payment of the claim maintenance fee (Sec.
102(a)(4)(B).

--Fails to recognize the cyclical nature of mineral prices and the
economic and geological reasons for dropping and relocating
claims.
--Unnecessarily penalizes companies wanting to invest in domestic
mineral exploration and production without any policy or
on-the-ground justification.
--Increases risks and costs associated with grassroots exploration
and mining resulting in fewer new mineral discoveries and
an increased reliance on foreign sources of minerals.

The unsuitability withdrawal provisions in S. 796 give
federal land management agencies unprecedented broad authority
to subjectively withdraw lands from mineral development.
Incredibly, it leaves that decision to the discretion of the
local land manager without considering the mineral potential of
the lands or providing guidelines and standards to follow
(Sec. 307).

--Putting potentially mineralized lands off-limits to mining will
increase the Nation's reliance on foreign minerals.
--FLPMA and the Antiquities Act of 1906 provide more than adequate
statutory authority for any withdrawal of lands deemed
necessary by the agencies to protect lands too sensitive
for mining-related activities.
--The substantial land withdrawals of the past 4 decades
demonstrate that no new additional withdrawal authority is
necessary.

S. 796 mandates the Secretaries of Interior and Agriculture
to jointly promulgate regulations to carry out the Act without
guidelines or standards, potentially creating duplicative
environmental regulations while ignoring the existing
comprehensive framework of federal and state environmental laws
that the National Research Council (NRC) found effective in
protecting the environment from impacts of mining (Sec.
306(d)).

--New regulations in addition to requirements already applicable
under the Federal Land Policy and Management Act or the
National Forest Management Act will create confusion,
uncertainty, and cause further permitting delays, making
the U.S. less attractive to investors.
--This is a solution in search of a problem.

S. 796 includes a very restrictive definition of ``casual
use.'' The definition ``ordinarily result in no or negligible
disturbance of federal land or resources'' is very narrow and
imprecisely defined, leaving the door open to a more
restrictive definition by regulation (Sec. 2(4)).

--Allows the agencies to require a permit for virtually every
activity adding tens of thousands of permit applications.
There is no way the BLM or USFS could process the thousands
of permits that would be required, causing greater
permitting delays for all projects;
--In spite of evidence to the contrary, this implies that all
prospecting and exploration activities are significant and
will require an EA or EIS, adding delays, burdening the
agencies' workload and increasing permitting costs without
any corresponding environmental benefit.

S. 796 requires public notice and comment prior to the
release of any financial assurance (Sec. 304).

--Release should be based strictly on technical criteria, financial
analysis and the reclamation plan as set forth in the
mining permit;
--If the reclamation work has been accepted by the agency, there is
no legitimate matter on which public opinion should be
considered.

S. 796 removes bentonite, high grade calcium carbonate
deposits and other locatable industrial minerals from operation
of the Mining Law, and potentially could remove uranium (Sec.
504 and Sec. 505).

--Overrules several IBLA cases and the McClarty test for verifying
distinct and special value.
--Subjecting these minerals to agency discretion, highly restricted
permits, and competitive sales under the Material Sales Act
of 1947 will make it more difficult to attract investment
and meet America's demand for these important minerals from
domestic sources.

S. 796 repeals the General Mining Laws except for the
provisions relating to location of mining claims not
specifically modified by the Act (Sec. 506(c)).

--Repealing 137 years of interpretation and precedent is bad public
policy, creating uncertainty and increasing the likelihood
of unnecessary and costly litigation. The Mining Law needs
surgical amendments to address recognized shortcomings, not
a complete overhaul.
--Throws the baby out with the bath water.

As currently drafted, the reclamation fee in S. 796
(Sec. 403) and S. 140 (Sec. 103), when combined with the
royalty in S. 796 (Sec. 201) and S. 140 (Sec. 101), would
render most mines uneconomic resulting in premature closure of
existing mines and fewer mines being built, increasing the
Nation's reliance on foreign sources of minerals.
conclusion
S. 796 and S. 140 are disastrously bad bills for the U.S. mining
industry and, more importantly, for the country, its economy and the
American workforce. S. 796 eliminates security of land tenure, creates
insurmountable regulatory hurdles, empowers third-parties to petition
to withdraw lands from mining--even after valuable minerals have been
discovered, and creates new unrealistic and impractical standards for
mining. S. 140 imposes a gross royalty scheme that would cause
premature mine closures, wasting of public minerals, depriving the
public of a longer royalty stream, and causing greater global
environmental impacts. S. 796 and S. 140 create many uncertainties for
the mining industry. But one thing is certain--these bills will create
the following serious problems for the Nation if they become law:

America's renewable energy future will be jeopardized;
America's national and economic security will be severely
weakened as well paying, family-wage level jobs are exported
overseas and our Nation becomes more reliant on foreign sources
of strategic and critical minerals;
Mineral production on America's public lands will be
abruptly curtailed;
America's already extensive reliance on foreign sources of
minerals will dramatically increase due to the significant
reduction in domestic mineral production;
Mining-dependent rural communities will experience
devastating economic hardships;
The federal government will be subject to substantial
takings litigation.

NWMA urges Congress to enact Mining Law amendments that will reduce
America's reliance on foreign minerals; encourage production of
domestic sources of the minerals needed for America's national and
economic security; promote the creation of thousands of high-paying
family-wage jobs; and strengthen the economy in rural communities
throughout the West. However, S. 796 and S. 140 are not the answer. In
fact, if S. 796 or S. 140 is enacted it will have the exact opposite
result.
NWMA appreciates the opportunity to provide this testimony and
looks forward to working with the Committee to develop common-sense,
appropriately balanced amendments to modernize and reform the Mining
Law of 1872 consistent with this testimony.
______

Statement of Thomas S. ``Scotty'' Hinman, Board Chairman, Big Horn
County Office of County Commissioners, Basin, WY, on S. 796
The Big Horn County Commissioners of Wyoming appreciate the
opportunity to comment on new legislation to reform the General Mining
Act of 1872 known as the Hardrock Mining and Reclamation Act of 2009
(S. 796).
Big Horn County along with other sites in Wyoming and Montana are
blessed with the highest quality bentonite in the world. The companies
mining this mineral in Big Horn County are American Colloid Company,
Bentonite Performance Minerals, MI SWACO, and Wyo-Ben, Inc. The revenue
collected in Big Horn County from bentonite mining in 2008 was 12 % of
the county's total taxable income.
The presence of the bentonite mining industry is vital to our
county. This industry not only contributes to our county budget but
provides employment to 1, 202 individuals, which is around 17% of our
county residents. To place bentonite under the Mineral Materials Act
and make it a common leasable mineral (Section 504 of the revision),
could severely affect the bentonite companies willingness to invest in
future projects in our county and thus limit economic growth. This
single change would be a departure from the long standing
classification of bentonite as a locatable mineral and cause another
layer of record keeping and confusion when dealing with payments and
reporting. Please leave bentonite in the category of locatable
minerals.
We support a reasonable royalty system for locatable minerals that
takes into account the value and expenses associated with production of
these minerals. Industrial minerals generally are low-cost, low margin
minerals and the royalty rates must reflect those facts. The proposed
2% royalty on mine mouth valuation would be a reasonable level of
royalty for use of federal land.
We feel that the current system of regulatory oversight by both the
State and Federal agencies provides a very good framework for
environmental stewardship. Permitting delays already prevent timely
development of resources, so adding another layer of environmental
requirements would not improve reclamation and would only serve to
delay development. The Big Horn County Board of Commissioners would
appreciate your support for a realistic royalty, secure land tenure,
and reinforcement of existing environmental standards (not new ones)
for industrial minerals. The presence of this industry is vital to our
county.
We would request that this letter be submitted for the record at
any hearing on this issue.
With the signature below of our chairman, the Big Horn County
Commissioners unanimously supports the mining industry in Big Horn
County. We would invite you to contact us with any questions in regards
to our concern.
Thank you for your time and consideration.
______

Statement of Keith Grant, Bighorn County Commissioner, Lovell, WY
The four bentonite companies in our county American Colloid,
Bentonite Performance Minerals, Wyo-Ben and MI Drilling are vital to
our county. This industry not only contributes to our county budget but
provides employment to a number of citizens living in this area. To
place bentonite under the Mineral Materials Act and make it a common
leasable mineral and impose an 8% royalty could be devastating to
Bighorn County. There are 1,202 mining jobs in Bighorn County as of
2006 second only to Government with 1542 jobs. This industry is very
important to the survival of Bighorn County.
It is my understanding that the current mining law reform
discussion in Washington is placing industrial minerals such as
bentonite with valued metals, such as gold and silver. Industrial
Minerals generally are low-cost, low margin minerals and the royalty
rates must reflect those facts.
The revenue collected from bentonite mining is significant as well
as the employment it offers to many individuals in Bighorn County . We
hope you will support our concern and place a royalty on bentonite that
is realistic. We value the presence of these Bentonite companies in our
county and the relationship we have built with them in protecting our
natural resources.
The royalty obligation to develop minerals on the public lands must
be reasonable to keep industrial mineral production on public lands
globally competitive. A royalty rate for industrial minerals produced
from new mining claims on the order of two percent (2%) based on mine-
mouth values (e.g., ``dirt out of the ground'') is regarded as both
reasonable and fair.
I would appreciate any efforts on our behalf you could put towards
this process.
______

Statement of Mark G. Ellis, President, the Industrial Minerals
Association--North America, on S. 796
On behalf of the Industrial Minerals Association--North America
(IMA-NA), we offer this testimony regarding the hardrock Mining and
Reclamation Act of 2009 (S. 796).
IMA-NA is a trade association that represents companies that
produce industrial minerals such as ball clay, barite, bentonite,
borates, calcium carbonate, diatomite, feldspar, industrial sand,
kaolin, mica, soda ash, talc, and wollastonite, and associate member
companies that provide goods and services to the industry. IMA-NA
typically represents seventy-five percent or more of the production for
each of these minerals in the United States. IMA-NA members have
demonstrated a commitment to the goals of sustainable development and
operating in an environmentally responsible manner.
The United States enjoys the most environmentally benign processes
for production of industrial minerals in the world. Industrial minerals
are critical to manufacturing many of the products that we use every
day. They are used in the production of drinking water, electricity,
steel, copper, gold, glass, ceramics, paper, plastics, cement and
concrete, rubber, detergents, insulation, pharmaceuticals, cosmetics,
and oil and gas exploration and extraction. They also are used to make
foundry cores and molds used for metal castings, in paints, filtration,
metallurgical applications, refractory products and specialty fillers.
According to the U.S. Geological Survey's 2009 Mineral Commodity
Summaries published earlier this year, the industrial minerals industry
currently employs an estimated 81,000 workers in the United
States.\1\This number is higher than either the metal or coal sectors
of the industry. The total annual production of the industrial minerals
industry is $43,600,000,000.\2\
---------------------------------------------------------------------------
\1\ See U.S. Geological Survey, 2009, Mineral Commodity Summaries
2009, p.8 http://minerals.usgs.gov/minerals/pubs/mcs/2009/mcs2009.pdf
\2\ Id.
---------------------------------------------------------------------------
The industrial minerals industry is very active throughout the
Western United States and quite a bit of the production is on public
lands. Any update to the General Mining Law of 1872 stands to greatly
impact our industry, and thus the manufacturing industry within the
United States. In fact, as currently drafted, the legislation would
decimate the market for some of our minerals, and forfeit many of the
jobs provided by our industry.
IMA-NA supports meaningful Mining Law reform. The United States is
blessed with an abundance of natural resources, including minerals. As
the nation grew, the General Mining Law established the framework for
the exploration, discovery and development of hardrock mineral
resources. Those mined resources helped create the wealth and
infrastructure that established America as a great nation. Our
population continues to require those same resources to sustain an
improving standard of living. Today we expect, and demand, that mining
be conducted responsibly and in accordance with all environmental
protection laws. We live in a globally competitive environment and the
U.S. continues to need a legal framework that encourages the long-term
capital investment required to develop and produce minerals on the
public lands. When mining is concluded, the land should be reclaimed,
restored, or improved. The federal treasury also should be reasonably
compensated for the minerals extracted. Meaningful Mining Law reform
should recognize and embrace these basic concepts.
While IMA-NA is generally supportive of the effort undertaken by
Chairman Bingaman to update the Mining Law of 1872, we have significant
concerns about some of the provisions included in the proposed
legislation.
industrial minerals are and must be locatable minerals
The Industrial Minerals Association--North America and its members
strongly encourage the Chairman and Members of this Committee to strike
Section 504 ``Uncommon Varieties'' from the proposed Hardrock Mining
and Reclamation Act of 2009. From the perspective of an industrial
minerals producer, uncommon industrial minerals are properly defined as
locatable minerals and must remain locatable minerals if these minerals
are to be developed beneficially on public lands.
Why Uncommon Industrial Minerals Are Properly Defined As Locatable
Minerals
A primary implication of having a mineral defined as a locatable
mineral is the primacy of access afforded to the person who has
discovered a commercially viable deposit of the mineral. Once a person
has undertaken the work and expense of staking a claim, exploring the
claim for a suitable mineral resource, and delineating the resource to
determine commercial viability, it is logical that access to that
deposit for the purpose of developing the found mineral be awarded to
that person. In our view, the logic is as applicable to uncommon
industrial minerals as it is to hardrock minerals.
Uncommon industrial minerals, as recognized in Section 3 of the Act
of July 23, 1955 (30 U.S.C. 611), have the attribute of being
``valuable because the deposit has some property giving it distinct and
special value''. Conceptually, the ``property'' inherent in an
industrial mineral deposit that gives that deposit distinct and special
value is no different than a gold deposit where the ``property'' that
gives the deposit distinct and special value is the gold contained in
the rock. Bentonite clay has properties that make it rarer and more
valuable than common clay. High-calcium limestone has properties that
make it rarer and more valuable than common limestone. Gold-bearing
rock has properties that make it rarer and more valuable than common
rock.
Significant expenditures are required to explore for and delineate
uncommon industrial mineral deposits. Several deposits may be explored
before one is identified as having the required properties and size to
make it commercially viable. Like hardrock deposits, uncommon
industrial mineral deposits are explored using drilling machinery to
collect core samples that are analyzed to determine if the required
mineral properties exist. Samples must be taken over wide areas to
delineate the extent of the deposit. Development of an uncommon
industrial mineral deposit (e.g., clearing the land, removing soil and
overburden rock, developing the mine, constructing infrastructure and
installing machinery) in order to put the deposit into production also
requires significant expenditure.
For example, the investigation and exploration costs to identify a
high-calcium limestone or pure-dolomite limestone deposit (to be used
for commercial quicklime production), permit and develop a quarry, and
then put the quarry into production can exceed $30 million. The
additional investment to permit and construct a quicklime manufacturing
facility can easily exceed $100 million.
There is also significant legal precedence regarding how industrial
minerals are treated under the General Mining Law. In 1979, the U.S.
Department of Interior's Bureau of Land Management (BLM) filed suit
against Kaycee Bentonite Corporation.\3\ The BLM contended that 130
claims made under the General Mining Law were invalid because the
bentonite (a clay) found within the claims was not a valuable mineral
subject to location under the mining laws. The BLM asserted that only
``uncommon varieties'' of bentonite or bentonite of an ``exceptional''
nature as compared to other deposits of bentonite are locatable, and
because the bentonite in question did not satisfy certain physical-
chemical standards adopted by BLM, it was not an ``uncommon variety''
of bentonite or an ``exceptional'' bentonite.\4\
---------------------------------------------------------------------------
\3\ See United States of America v. Kaycee Bentonite Corporation,
U.S. Department of Interior Office of Hearings and Appeals--Hearings
Division, IBLA 79-445, April 26, 1979.
\4\ See id, p. 4.
---------------------------------------------------------------------------
In his decision, Administrative Law Judge Robert Mesch found that
when determining whether bentonite was of the ``uncommon variety'' one
had to use the ``exceptional/common clay'' test. The question here is
whether the particular bentonite has exceptional qualities that make it
useful for purposes for which common clays cannot be used. Judge Mesch
noted in his decision:

``Wyoming'' or ``western'' bentonites have a unique set of
chemical and physical properties. No earth or non-bentonitic
clay, however treated or blended, can duplicate those chemical
and physical properties. It is the chemical and physical
properties of bentonite, itself, which make it useful for
purposes which common clay cannot be used. Blending or the use
of chemical additives does not add to or alter its chemical or
physical properties, it merely enhances the properties inherent
in bentonite as it occurs in nature.\5\
---------------------------------------------------------------------------
\5\ See id., p.36.

The decision was affirmed by the Interior Board of Land Appeals
(IBLA) three years later following an appeal from the BLM.\6\ These
decisions have given a legal precedence to the claim that bentonite is
an uncommon clay, and should be locatable under the General Mining Law
of 1872.
---------------------------------------------------------------------------
\6\ See United States v. Kaycee Bentonite Corp., 64 IBLA 183 (1982)
---------------------------------------------------------------------------
Why Uncommon Industrial Minerals Must Remain Locatable Minerals
Because of the significant cost of exploration, delineation, and
development of an uncommon industrial mineral deposit and associated
processing facilities, the only viable business model for commercial
development of these deposits is one that is based on secure, long-
term, exclusive access to the deposit. No business operator would be
willing to pursue costly exploration and delineation of an uncommon
industrial mineral deposit if a competitor could then access the
deposit through a competitive contract sale. No business operator would
invest in development of a deposit and construction of a processing
facility if they only were assured access to the deposit for a maximum
of ten years.
If uncommon industrial minerals do not remain as locatable
minerals, new uncommon industrial minerals projects will not move
forward. This will result in future shortages of these minerals,
increased costs for consumers of these minerals, and the loss of good,
high-paying jobs.
Why Strike Section 504
Section 504 of the proposed Hardrock Mining and Reclamation Act of
2009 would have the affect of ensuring uncommon industrial minerals
would not continue to be defined as locatable minerals. Section 504
also would overturn legal precedents that have established clear
definitions for how to determine if an industrial mineral should be
deemed locatable.
Section 504 (b)(2)--DISPOSAL, states:

Disposal--Subject to valid existing rights, effective
beginning on the date of enactment of this subsection,
notwithstanding the references to the term common varieties in
this section and to the exception to the term relating to a
deposit of materials with some property giving it distinct and
special value, all deposits of mineral materials referred to in
this section (including block pumice referred to in subsection
(c)(1)) shall be subject to disposal only under the terms and
conditions of the Act of July 31, 1947 (commonly known as the
Materials Act of 1947)(30 U.S.C. 601 et seq.)

As we understand this language, it would appear that all deposits
of these minerals\7\, whether common or uncommon, would be subject to
disposal under the Mineral Materials Act and removed from the General
Mining Law. The Mineral Materials Act authorizes the Secretary to
dispose of mineral materials on the public lands of the United States
through competitive sales in accordance with rules and regulations
promulgated under the authority of the Act. The regulations for this
purpose are found at 43 CFR Part 3600. These regulations were designed
in anticipation of small volume, short-term commodity type sales of
material, such as sand and gravel needed for road projects. They
establish a disposal method that involves competitive contract sales
based on volume or tonnage, two-year price adjustments and a maximum
contract period of 10 years. The BLM can designate an area for common
use and the submission of a mining and reclamation plan is at the
option of the BLM.
---------------------------------------------------------------------------
\7\ The minerals listed at the beginning of section 504 referenced
here include: sand, stone, gravel, pumice, pumicite, cinders, and clay.
Stone could refer to high-grade calcium carbonate, diatomite, talc, and
other industrial minerals.
---------------------------------------------------------------------------
Conditions for disposal under the Mineral Materials Act are such
that no viable business model would exist for identifying and
exploiting these valuable mineral resources. As stated above, the
consequence of uncommon industrial minerals not remaining as locatable
minerals will be the cessation of uncommon industrial mineral
development on public lands. Jobs would be lost. Small towns that rely
on these high-paying mining jobs that are their life-blood would be
destroyed. And the federal government would be costing itself millions
of dollars each year in lost revenue from the royalty fees under
consideration.
It is for these reasons that we strongly encourage the Chairman and
Members of this Committee to strike Section 504 ``Uncommon Varieties''
from the proposed Hardrock Mining and Reclamation Act of 2009.
royalty provisions
IMA-NA strongly supports a production payment or royalty for
materials extracted from public lands. IMA-NA believes the approach
taken in the legislative proposal by Senator Bingaman amounts to a good
first-step and solving the royalty rate issue in Title II. We are
concerned though that the actual rate is left uncertain as it is
subject to a rulemaking process. The uncertainty could damage the
mining industry in the U.S. as they wait for the rulemaking process to
conclude.
IMA-NA believes that any production payment royalty system should
be based on mine-mouth values for minerals produced from new mining
claims on federal lands. Industrial minerals, although some are rare
and unique, typically are low-cost, low-margin minerals and the royalty
rate applied to industrial minerals must reflect those facts. In
establishing a royalty rate and valuation methodology Congress
historically has recognized distinct economic models among the various
minerals produced from public lands. Similar distinctions must be
carried forward in the royalty rate and valuation methodology related
to locatable minerals in any reform of the Mining Law. The royalty
obligation to develop minerals on the public lands must be reasonable
to keep industrial mineral production on public lands globally
competitive. A royalty rate for industrial minerals produced from new
mining claims on the order of two percent (2%) based on mine-mouth
values (e.g., the unprocessed mineral) is regarded as both reasonable
and fair.
security of title and tenure
IMA-NA is very concerned that this legislation will significantly
impact the security of tenure our operations require by eliminating the
right to use or occupy public land for mineral purposes. We would
support amendments that provide for security of title and tenure from
the time of location through mine reclamation and closure. Long-term
capital investments require certainty and the patenting of lands
historically provided that certainty. If patenting were abandoned, a
substitute legal framework would be required to clarify existing rights
applicable to surface and subsurface activities in advance of, as well
as during, development and through reclamation.
environmental standards
IMA-NA supports recognition of the existing comprehensive framework
of federal and state environmental laws that regulate all aspects of
mining from exploration through reclamation and closure. Additional
environmental standards specific to mining on public lands are not the
solution. Instead, the solution lies in compliance with, and uniform
enforcement of, existing laws and regulations.
abandoned mine land and community impact funds
IMA-NA supports the establishment of AML and community impact funds
financed by revenue generated from the royalty/production payments. Any
new programs should be coordinated with existing state and federal
programs.
access to public lands
IMA-NA supports multiple use of public lands. Absent specific
Congressional withdrawals, the public lands should be open to mineral
exploration and development. When not closed for safety reasons related
to mining operations, the public lands should be open to other
compatible uses. Mineral exploration and development can, and should,
occur concurrently and sequentially with other resource uses.
conclusion
IMA-NA supports meaningful Mining Law reform. Our industry is a
significant portion of the United States mineral industry, and as a key
feedstock to many everyday products, a vital part of the manufacturing
industry. The industrial minerals industry that has operations on
public lands stands to be severely impacted by Section 504 of S. 796,
the Hardrock Mining and Reclamation Act of 2009.
The industrial minerals industry is responsible for the employment
of roughly 81,000 employees throughout the United States, a number that
is not quite three times that of the metals sector.\8\ The industry had
a total production of $43,600,000,000 in 2008.\9\ Removing industrial
minerals, such as bentonite and calcium carbonate, from the provisions
of the General Mining Law and placing them under the jurisdiction of
the Mineral Materials Act of 1955 would potentially be an industry
killer, and almost certainly will be a jobs killer in the western
United States. Industrial minerals operations typically exist in rural
areas, and are the life-blood of small communities. The industry
provides secure, high-paying jobs that help to keep rural communities
afloat.
---------------------------------------------------------------------------
\8\ See U.S. Geological Survey, 2009, Mineral Commodity Summaries
2009, p. 8. http://minerals.usgs.gov/minerals/pubs/mcs/2009/mcs2009.pdf
The metals sector employs 33,000 workers.
\9\ Id.
---------------------------------------------------------------------------
The Mineral Materials Act of 1955 was designed to give states easy
access to common materials such as stone and gravel used for building
roads. The extraction of these materials is not reliant on security of
tenure of land or capital investment, whereas industrial minerals'
operations are extremely reliant on capital investment and security of
tenure of land. Some of our operations require $60-100 million in
investments and require 50 years or more to adequately complete
operations.
Attempts to move industrial minerals into the Mineral Materials Act
have been denied by the IBLA in the past. Industrial minerals, such as
bentonite, have consistently been recognized as unique and locatable
minerals under the General Mining Law in these challenges. To do
otherwise at this stage would be ignoring decades of established case
law and precedence.
For these reasons, the Industrial Minerals Association--North
America and its members strongly encourage the Chairman and Members of
this Committee to strike Section 504 ``Uncommon Varieties'' from the
legislation when S. 796, the Hardrock Mining and Reclamation Act of
2009, comes up for consideration.
IMA-NA stands ready to participate constructively in this important
discussion regarding how to ensure a fair, predictable and efficient
legal and regulatory climate in Mining Law reform. We thank you for the
opportunity to submit this statement for the record, and would be happy
to make ourselves available to the Committee to answer any questions
you may have regarding our statement.
______

Statement of the Interstate Mining Compact Commission and the National
Association of Abandoned Mine Land Programs, on S. 796
This statement is submitted on behalf of the Interstate Mining
Compact Commission (IMCC) and the National Association of Abandoned
Mine Land Programs (NAAMLP) concerning the ``Hardrock Mining and
Reclamation Act of 2009'' (S. 796) introduced by Senator Bingaman and
the ``Abandoned Mine Reclamation Act of 2009'' (S. 140) introduced by
Senator Feinstein. Our statement will focus primarily on those portions
of the bills that address the reclamation of abandoned hardrock mines.
However, we will also generally speak to the provisions of S. 796 that
establish new requirements for the mining of locatable minerals on
public domain lands under the Mining Law of 1872. We appreciate the
opportunity to submit this statement.
The Interstate Mining Compact Commission (IMCC) and the National
Association of Abandoned Mine Land Programs (NAAMLP) are multi-state
governmental organizations that together represent some 30 mineral-
producing states and Indian tribes, each of which implements programs
that regulate the environmental impacts of both coal and hardrock
mining. Many of these programs involve delegations of authority from
the federal government pursuant to national environmental laws such as
the Surface Mining Control and Reclamation Act (SMCRA), the Clean Water
Act and the Resource Conservation and Recovery Act. Under these
statutes, the states and tribes exercise primary responsibility for the
permitting and inspection of the affected mining operations, for the
enforcement of applicable environmental performance standards, and for
the protection of public health and safety.
The development of our Nation's mineral resources is a critical
component of our national well-being and security. Our manufacturing
activities, transportation systems and the comfort of our homes depend
on the products of mining. At the same time, it is essential that an
appropriate balance be struck between the need for minerals and the
protection of public health and safety and the environment. Over the
past 40 years with the passage of sweeping national environmental laws,
the states and Indian tribes have taken the lead in fashioning and then
implementing effective programs for the regulation of mining and its
impacts, including the cleanup of inactive and abandoned mine lands. As
we face new challenges associated with homeland security, climate
change and alternative energy sources, the importance of mineral
development will be heightened, as will the role of state and tribal
regulatory authorities.
We commend both you, Mr. Chairman, and Senator Feinstein for your
continued commitment to craft a meaningful and effective program for
reclaiming and restoring the land and water adversely affected by past
hardrock mining. Without a national solution for this legacy issue, it
is unlikely that significant progress can be achieved. This is due
primarily to the lack of sufficient funding, not a lack of will by the
states, tribes and others to do something about the matter. The states
and tribes--often together with our federal agency partners--have made
notable progress in addressing the issue. But our efforts need a
substantial boost and the legislation before the Committee today will
accomplish this goal.
Nationally, abandoned mine lands continue to have potentially
significant adverse effects on the environment. Some of the types of
environmental impacts that occur at AML sites include subsidence,
surface and ground water contamination, erosion, sedimentation,
chemical release, and acid mine drainage. Safety hazards associated
with abandoned mines account for deaths and/or injuries each year.
Abandoned and inactive mines, resulting from mining activities that
occurred over the past 150 years prior to the implementation of present
day controls, are scattered throughout the United States. The sites are
located on private, state and public lands.
Over the years, several studies have been undertaken in an attempt
to quantify the hardrock AML cleanup effort. In 1991, IMCC and the
Western Governors' Association completed a multi-volume study of
inactive and abandoned mines that provided one of the first broad-based
scoping efforts of the national problem. Neither this study, nor any
subsequent nationwide study, provides a quality, completely reliable,
and fully accurate on-the-ground inventory of the hardrock AML problem.
Both the 1991 study and a recent IMCC compilation of data on hardrock
AML sites were based on available data and professional judgment. The
data is seldom comparable between states due to the wide variation in
inventory criteria. Nevertheless, the data do demonstrate that
nationally, there are large numbers of significant safety and
environmental problems associated with inactive and abandoned hardrock
mines and that cumulative remediation costs are very large.
Across the country, the number of abandoned hardrock mines with
extremely hazardous mining-related features has been estimated at
several hundred thousand. Many of the states and tribes report the
extent of their respective AML problem using a variety of descriptions
including mine sites, mine openings, mine features or structures, mine
dumps, subsidence prone areas, miles of unreclaimed highwall, miles of
polluted water, and acres of unreclaimed or disturbed land. Some of the
types of numbers that IMCC has seen reported in our Noncoal Report and
in response to information we have collected for the Government
Accountability Office (GAO) and others include the following gross
estimated number of abandoned mine sites: Alaska--1,300; Arizona--
80,000; California--47,000; Colorado--7,300; Montana--6,000; Nevada--
16,000; Utah--17,000 to 20,000; New York--1,800; Virginia--3,000
Washington--3,800; Wyoming--1,700. Nevada reports over 200,000 mine
openings; New Mexico reports 15,000 mine hazards or openings; Minnesota
reports over 100,000 acres of abandoned mine lands and South Carolina
reports over 6,000 acres. While the above figures attempt to capture a
universe of all abandoned mine sites by state, the actual number of
sites that pose significant health, safety or serious environmental
problems is likely far lower.
What becomes obvious in any attempt to characterize the hardrock
AML problem is that it is pervasive and significant. And although
inventory efforts are helpful in attempting to put numbers on the
problem, in almost every case, the states and tribes are intimately
familiar with the highest priority problems within their borders and
know where limited reclamation dollars must immediately be spent to
protect public health and safety or protect the environment from
significant harm.
Estimating the costs of reclaiming hardrock abandoned mines is even
more difficult than characterizing the number of mines. If one accepts
the estimates of the number of AML sites, one can develop a very rough
estimate for the costs of safeguarding mine hazards and reclaiming
small surface disturbances. But the costs of remediating environmental
problems such as ground water and surface water contamination, acid
rock drainage or wind blown contaminants are extremely difficult to
estimate. And many of these problems will not be fully detected unless
thorough assessment and testing occurs at a site
In a recent effort to quantify and forecast what states could spend
immediately as part of an economic stimulus package that focuses on the
cleanup of abandoned hardrock AML sites over the next 18 to 24 months,
IMCC and NAAMLP provided information from nine western states to your
Committee in a statement submitted for the record at a hearing on
``Clean Energy and Natural Resource Proposals to Stimulate the Economy
and Create Green Jobs'' last December. An updated summary of that
information is attached to this statement. Few of these projects have
been funded to date and are examples of how new funding under the
proposed legislation would immediately be put to use.
In addition to the forecasts provided by these states regarding
economic and job enhancements, it should be noted that, in general, for
every dollar spent by the states/tribes on local construction, this
translates to $2.70 that is spent in the local economy for things such
as supplies and materials, local equipment rentals and equipment
operators, and employee support.
Today, state and tribal agencies are working on hardrock abandoned
mine problems through a variety of state and federal funding sources.
Various federal agencies, including the Environmental Protection
Agency, the Bureau of Land Management, the National Park Service, the
U.S. Forest Service, and the U.S. Army Corps of Engineers have provided
some funding for hardrock mine remediation projects. These state/
federal partnerships have been instrumental in assisting the states and
tribes with our hardrock AML work and, as states and tribes take on a
larger role for hardrock AML cleanups into the future, we will continue
to coordinate with our federal partners. However, most of these
existing federal grants are project specific and do not provide
consistent funding. For states and tribes with coal mining, the most
consistent source of AML funding has been the Title IV grants under the
Surface Mining Control and Reclamation Act (SMCRA). Section 409 of
SMCRA allows states and tribes to use these grants only at high
priority non-coal AML sites. The funding is generally limited to
safeguarding hazards to public safety (e.g., closing mine openings) at
hardrock sites. It is worth noting that recent fatalities at abandoned
hardrock mine sites have been in states without SCMRA-funded AML
programs. The small amount of money that SMCRA states have been able to
spend on physical safety hazards at hardrock sites appears to be making
a difference. More specific information regarding the nature and extent
of the hardrock AML accomplishments of the states and tribes is
available from IMCC and NAAMLP.
As states and tribes work to address the remaining inventory of
abandoned hardrock mine sites, we are increasingly concerned about the
escalating costs of addressing those problems that continue to go
unreclaimed due to insufficient funding. Unaddressed sites worsen over
time, thus increasing reclamation costs. Inflation exacerbates these
costs. The longer the reclamation is postponed, the less reclamation
will be accomplished. In addition, the states and tribes are finding
new, higher priority problems each year, especially as many of our
urban areas grow closer to what were formerly rural abandoned mine
sites. New sites also continually appear due to the effects of time and
weather. This underscores the need for constant vigilance to protect
our citizens and the importance of the legislation before the Committee
today.
With the foregoing as background, we will now address several
aspects of both S. 796 and S. 140 that deserve mention. One of the most
important features of both bills is the establishment of a consistent
and robust funding source for addressing hardrock AML problems. While
we do not have a formal position on the various royalty and fee
provisions contained in the two bills, we do believe that some
combination of these funding mechanisms is critical to the success of a
hardrock AML program. Without certain, reliable funding from year to
year, the states and tribes will be unable to effectively plan for and
execute a meaningful AML program. We therefore strongly recommend an
appropriate combination of funding sources that will consistently
support a long-term AML program that will result in substantial
reclamation work over the life of the program. We also support
continued funding for the hardrock AML programs already in place at
BLM, the Forest Service and the National Park Service. These programs
have a unique focus and should not be supplanted by new legislation.
Much valuable work continues to be accomplished pursuant to these
programs, often in partnership with the states and tribes.
Another key component of an effective hardrock AML program is the
provision contained in S. 796 concerning state programs. Today, there
are abandoned mine land programs in most states. These include the 28
programs established by states and tribes under SMCRA Title IV, along
with states across the country that are not eligible for Title IV
funding, including Nevada, California, Arizona, Idaho, New York, South
Carolina and North Carolina. All of these states and tribes are
experienced with administering federal grants and completing AML
projects in a cost-effective manner, including projects on federal
land. It is essential that the states and tribes be provided an
opportunity to assume primary responsibility for implementing any
hardrock AML program given the unique differences among the states and
tribes in terms of geology, climate, terrain and other physical and
environmental conditions. This state/tribal-lead approach will assure
the most critical AML problems are addressed first, since the states
and tribes are closer to the problems and can make a better
determination about priority sites and actual remediation work. In
addition, they also have assembled professional staffs with many years
of experience (in some cases over 30 years) and an excellent local
contracting knowledge base. State and tribes would require minimal
staffing increases compared to a new federal program, thereby
increasing on-the-ground results per program dollar.
In the West, several states, including New Mexico, Colorado, Utah,
Wyoming and Montana, have used SMCRA Title IV funds to address a number
of significant AML problems, both coal and hardrock. In addition, these
AML programs have cooperative agreements with the Forest Service, the
National Park Service, BLM and the U.S. Army Corps of Engineers that
allow those agencies to fund AML projects on their lands when money is
available. It is simply more efficient for the federal land managers to
use the already established state AML programs with their staff of
experienced engineers, reclamation specialists and project managers to
design and conduct cost-effective AML projects on federally-managed
land within each state's boundaries. Given the importance of the states
being able to access SMCRA Title IV funds for noncoal AML work, any new
legislation should ensure that this practice can continue or increase.
In this regard, we support the provision in S. 796 that would recognize
and incorporate state and tribal programs approved under Title IV of
SMCRA. This provision should be expanded to include approval of
equivalent state AML programs in non-SMCRA states.
With regard to overall administration of the Hardrock Minerals
Reclamation Fund, we support the proposed role of the Office of Surface
Mining Reclamation and Enforcement (OSMRE). We believe that OSMRE has
the required expertise to oversee and administer the Fund and the
overall AML program based on its 30 years of experience under SMCRA. We
also support the necessary funding for OSMRE to carry out its duties
under the law.
We support the uses and objectives of the Fund designated in both
bills and believe they capture the nature of the complex AML problems
faced by the states and tribes. With regard to expenditures from the
Fund, and to be consistent with the state/tribal-lead approach that we
advocate, we support the awarding of grants to states and tribes
contained in S. 796. We recommend that these annual expenditures from
the Fund be off-budget and not subject to the annual appropriations
process. Given the known inventory of AML problems, we believe this
approach will guarantee that annual contributions to the Fund are
immediately distributed for work on-the-ground rather than retained in
a Fund that does little but generate interest. And with regard to
allocations from the Fund, we support the formula contained in S. 796
that takes into account both current and historic mineral production.
We believe that this arrangement represents a fair and equitable
disposition of moneys paid into the Fund and will allow the states and
tribes to effectively manage their programs and accomplish meaningful
reclamation work. It may be helpful to clarify that the 20 percent of
Fund allocations paid to the states based on existing production are
defined as a percentage of the total moneys paid into the Fund for the
current year by the respective states. As for the 30 percent allocation
from the Fund based on historic production, there will likely have to
be some consideration given in the formula to how the specific mineral
commodity is measured (ounces v. pounds v. tons) and the reference year
from which historic production is calculated. For instance, Nevada's
and California's mineral contributions to the nation predate both the
1872 Mining Law and the 1900 date from which historic production has
been previously calculated.
With respect to eligible land and water, we agree with the
definition in both bills. However, the legislation should recognize
that most hardrock AML problems are on non-federal lands, even in the
West. In most states, federal lands contain less than a quarter of all
hardrock AML sites. In part, this is due to the patenting of mining
claims in the nineteenth and early twentieth century that led to mining
occurring on private land. And when there are abandoned mine problems
on federal lands, they often spill over into adjacent non-federal lands
or in-holdings. To be effective, a hardrock AML program needs to be
able to spend funds on all classes of land. It should also be clarified
that there is no limitation on when land and water becomes eligible. In
California, for example, many of the legacy AML sites pre-date the 1872
Mining Law, so limiting eligibility to only those problems that are
post-1872 would be problematic.
A critical component of any reclamation program is prioritization
of sites and identification of remediation options. Abandoned mine
lands range from sites with features that require no remediation
because of their minimal size or risk; to sites which require
significant earthwork, topsoiling and revegetation for erosion and
pollution control; to safeguarding shafts and adits that present public
safety hazards; to remediating sites with significant toxic leachate
causing contamination of ground and surface waters. In addition, there
are hardrock mine sites with such a conglomeration of features, access
problems, drainage problems, etc., that estimated reclamation/
remediation costs exceed the entire annual AML budget of a state/tribe.
Regardless of which inventory or listing of sites is used, a large
portion of sites will require little if any reclamation. In other
cases, the per unit cost of reclamation is relatively small. These
sites will also rank low in priority because of the reduced threat to
public health or the environment. On the other end of the spectrum,
there will be a small number of sites that require a significant amount
of funding to remediate and that contain a chronic risk to public
health or the environment. Under current law, these are the sites that
are being or might be remediated under Superfund (the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)). The
AML priority sites should be those that constitute a physical threat to
public safety, and sites with significant contamination, but that will
likely never score high enough to be remediated under CERCLA.
Given the above considerations, each state or tribe should be
provided the discretion to determine which among the many sites in its
respective AML inventory deserves the most immediate attention, with
input from the federal land management agencies on whose land the sites
may be located. The states and tribes can also best decide the
appropriate remediation required under the circumstances given
available funding and resources. The priority scheme included in both
bills appears to accommodate this approach and as such we support it.
Another aspect of any hardrock AML program is the process of
quantifying the problem. A consistent and purpose-driven inventory of
AML problems is critical to understanding the magnitude of the problems
the states and tribes face. Assessing the present and future impacts to
the safety and health of citizens and the impacts to the natural
environment, while recognizing the changing cost structure of a long-
term program, are key to a meaningful inventory of problems. However,
lessons need to be learned from the inventory of abandoned coal mines
undertaken pursuant to the Surface Mining Control and Reclamation Act,
which is estimated to have cost more than $25 million and is still
fraught with controversy. Based on the SMCRA experience, any hardrock
AML inventory needs to: have well thought out goals and instructions;
maintain standardized inventory procedures; keep inventory crews small
to minimize inconsistencies in reporting methods; minimize the
influence on the inventory by those with vested interests in the
results; require any federal agency inventory work to be coordinated
with the states; utilize state-of-the-art GPS imagery; and be conducted
with consideration for seasonal vegetation cover. In this regard, we
support the $5 million cap contained in S. 796 on the amount of money
to be invested in any inventory effort, so as not to divert money and
energy from on-the-ground reclamation work. In addition, those states
whose AML programs meet the above standards should be allowed to keep
and rely upon their existing inventories and associated databases,
rather than being required to create or adopt new ones.
A new complication for state and tribal AML work that also needs to
be addressed is the limited liability protection provided for noncoal
AML work undertaken with SMCRA Title IV funds. A recent rulemaking by
OSMRE removed this protection and it could have a significant chilling
effect on the ability of the states and tribes to undertake some of
their noncoal projects with SMCRA funds. This may need to be addressed
with a perfecting amendment to SMCRA, but to the extent it can be
addressed in the pending legislation, so much the better.
S. 796 would provide for two special allocations from amounts paid
into the Fund: 1) 10 percent for grants to non-hardrock mining states
and 2) 10 percent for grants to public entities and nonprofit
organizations, such as watershed groups. We strongly support both of
these allocations and believe that their incorporation into the bill
will likely generate additional support for the bill. States other than
the western hardrock AML states have significant noncoal AML problems
within their borders and there are limited, if any, funds available to
address these sites. Therefore, to the extent that a small but
reasonable amount of funding can be set aside for work in these states,
it will make a difference in their efforts to remediate these sites.
Based on our experience with watershed cooperative agreements under
SMCRA, we believe that a program for nonprofit or public entities will
provide a welcome shot-in-the-arm for their efforts to address water
contamination and acid rock drainage issues in critical watersheds.
Now turning to those provisions in S. 796 that address active
hardrock mining operations under the 1872 Mining Law, we have one over-
arching concern. The bill establishes new permitting requirements for
both exploration and active mining operations and requires the
development of new operation and reclamation standards by the
Secretary. The bill sets new requirements for monitoring, inspections
and financial assurance and enhances existing enforcement standards.
While the bill, at Section 308, provides a recognition of state laws
that ``meet or exceed the requirements of this Act'' and deems them to
be ``consistent with'' the Act, it does not reconcile the inter-
relationship between these state laws and the federal regulatory
program established by the Act.
Most western states already operate comprehensive regulatory
programs that apply to active hardrock mining operations within their
borders, regardless of whether those operations occur on private, state
or public lands. Some western states have cooperative arrangements in
place that allow coordination between the states and federal land
management agencies. It is critical that any new federal law not only
recognize the existence of these programs and agreements, but be
structured in a way that avoids duplication of regulatory efforts and
resources and ensures maximum coordination between the states and the
federal government. In this regard, it is important for the bill to
address how these existing state/federal relationships are to continue
into the future. Without this adjustment, the potential for confusion
and ambiguity among applicable regulatory requirements is great, which
could in turn result in permit delays and litigation. The avoidance of
duplicative, conflicting federal requirements is also critical to the
continued effectiveness of the existing, well-established state
regulatory programs that are already in place.
The National Academy of Sciences spoke directly to this issue in
its1999 Report entitled ``Hardrock Mining on Federal Lands''. One of
its first findings and conclusions was that ``existing regulations are
generally well coordinated, although some changes are necessary.'' The
report went on to add that ``the overall structure of the federal and
state laws and regulations that provide mining-related environmental
protection is complicated but generally effective. The structure
reflects regulatory responses to geographical differences in mineral
distribution among the states, as well as the diversity of site-
specific environmental conditions. It also reflects the unique and
overlapping federal and state responsibilities.''
In light of these findings, which are still relevant today, we
believe that the Congress should move cautiously in requiring an
entirely new federal regulatory regime that will simply duplicate the
existing framework that is in place. To the extent that adjustments are
required in this framework, they can be undertaken through other means.
In fact, over time, this has occurred as state regulatory programs have
matured and federal/state cooperative agreements have been updated. An
excellent overview of the status of state noncoal regulatory programs
can be found in a publication by IMCC entitled ``Noncoal Minerals
Report'', released in May of last year. A copy is available on IMCC's
website (www.imcc.isa.us) or by contacting us.
A couple of examples may help to illustrate our concerns. S. 796
does not provide for a specific mechanism (as the House bill does) to
establish cooperative agreements or coordinated approaches between the
federal government and the states in order to avoid duplication of
resources and conflicts of laws. For instance, ground water discharge
permits issued by the state fully address many of the same elements
presented in S. 796, including operations, reclamation, and long-term
water treatment. Provisions need to be established whereby a state can
take the lead for these types of requirements, especially where state
law meets or exceeds the minimum requirements of the federal law. These
provisions will be critical to avoid duplication and unnecessary
burdens on state and federal regulatory staff and the mining industry.
Another example involves financial assurance. Any joint financial
assurance instrument between federal agencies and the states would be
difficult to administer, especially for long-term water treatment. The
Committee may want to consider adding language that allows the mine
operator to provide evidence of existing financial guarantee under
state law that meets or exceeds federal requirements. The state would
continue to hold the financial assurance instrument and it would be
directly payable to the state in the event of forfeiture. This would
avoid the need for formal state/federal agreements on the matter, which
in the past have proven difficult to reach, due in part to the
complexities of administering long-term financial assurance for water
treatment.
To the extent that any coordinated regulatory approach under the
bill anticipates the adoption of enhanced requirements in existing
state programs to meet federal standards, it will be incumbent on the
federal government to provide the necessary funding to accomplish this
task. The states are not in the position to incorporate new federal
mandates with existing resources, which are already stretched to the
limit. In addition, there are certain requirements included in the bill
that could prove problematic for the states to adopt given current
restrictions under state law. We therefore urge the Committee to
reconcile and incorporate in any reform of the 1872 Mining Law
provisions that address the relationship between existing state
regulatory programs and new requirements under the Act. For instance,
where a state's program meets or exceeds the requirements under the new
law, will the state continue to take the lead in regulating hardrock
mining operations in the state, or will there also be a duplicative
federal regulatory program in place? If the latter, how will
coordination of regulatory efforts (and resources) be addressed? If the
state is allowed to take the lead, but there are portions of the
state's program that are deemed to be ``inconsistent with'' the new
law, how will this be reconciled? How will the ``consistency'' standard
be defined? Will there be opportunities for federal funding assistance
where a state chooses to expand its regulatory jurisdiction to address
new requirements under the Act? Should a formal state/federal
cooperative agreement be provided for under the law?
There is also some question about what the term ``locatable
mineral'' means under the law and perhaps this should be clarified.
Some minerals are ``locatable'' under certain circumstances and
``leasable'' under others. For instance, uranium, which is currently
locatable under most cases, is leasable under the Atomic Energy Act
program mentioned in S. 796 (Section 505(B)(2)(D)), and may become
entirely leasable under future legislation. This creates confusion as
to whether all abandoned uranium sites are now, or will be in the
future, eligible for funding under the AML provisions of these bills.
This is particularly important given the legacy of AML sites from past
mining of uranium in New Mexico and other states. We realize that the
bill provides for a study by the National Academy of Sciences focused
on this matter. However, in the meantime, we believe that it is
important to clarify that, until such time as it is determined
otherwise, uranium continues to be a locatable mineral and thus subject
to the provisions of the Mining Law. In this regard, there is a concern
that the limitation on eligible land and water at Section 402(d)(2)
(referencing section 411(d) of SMCRA) could preclude the use of
Hardrock Minerals Reclamation Fund moneys on uranium mine cleanups.
Thank you for the opportunity to submit this statement. Should you
have any questions or require additional information, please contact
us.
attachment.--examples of hardrock abandoned mine projects ready for
immediate funding
South Dakota--South Dakota has one major mining Superfund
site waiting for remediation. The Gilt Edge Mine Superfund Site
is located in the northern Black Hills, approximately four
miles from the town of Deadwood. Mining activities began at the
site in 1876 and continued intermittently for more than 100
years. The most recent owner of the site, Brohm Mining Company,
operated a large-scale, open pit, heap-leach gold mining
operation at the site from 1986 until 1999. Brohm affected 265
acres consisting of open pits, waste rock depositories, process
facilities, and a heap leach pad. This mining activity caused
significant acid rock drainage. In 1999 Brohm abandoned the
site and in 2000 the EPA listed the mine as a Superfund Site.
Work accomplished to date is the construction of a lime water
treatment plant for treating acid water and the capping of a
65-acre acid generating waste rock facility. EPA recently
issued a Record of Decision for the remediation of the rest of
the site which includes three pits, waste rock depositories, a
heap leach pad and process facilities. Remedial design is
estimated to take one year with the selected remedy emphasizing
site-wide consolidation and containment of mine waste. The
estimated cost for the remaining reclamation work is $50
million and it will take five to seven years to complete
depending on availability of funding.
Montana--Potential abandoned mine projects for funding total
$31.7 million, with 202 persons projected to be employed. Some
of these projects are outside of the current AML planning
window, but could be brought to construction within 18 months
or less. Other projects face challenges related to access to
the affected lands by landowners or CERCLA actions by the
federal government. Some examples of projects include a bond
forfeiture and a recent environmental emergency, as follows:

Engineered portal plug for Evening Star/Big Dick mine blowout and
discharge to Little Blackfoot River. (Powell County). $6.5
million, 20 employed.
Silver Creek Tailings removal and stream reconstruction project
(Lewis and Clark County). $10 million, 40 employed.
Basin Creek Mine closure--bond forfeiture bankruptcy. Lewis and Clark
and Jefferson Counties. $4.7 million. 50 employed.
Winston Area Multi-site Mine Waste Repository and Reclamation
Project: East Pacific, Sunrise-January, Custer Millsite, and
Chartam Mine Sites (Broadwater County). $3.4 million 40
employed.
Emery Mine Reclamation Project (Powell County). $5 million. 25
employed.
Frohner and Nellie Grant Mine (Jefferson County) $1.5 million, 15
employed.
Broken Hill Mine Reclamation Project (Saunders County). $.8 million.
12 employed.

Colorado--The following projects address serious mine
hazards and environmental problems associated with abandoned or
inactive mines. The state and local community-based watershed
groups use the funding to develop and construct projects that
safeguard dangerous mine sites and to remediate environmental
problems associated with abandoned mines such as acid mine
drainage, and erosion of mine and mill waste piles into streams
and rivers. In addition these funds provide local economic
benefits by creating hundreds of jobs in Colorado's
construction industry. Every project dollar expended translates
into jobs in the construction, labor, equipment, materials and
service industries.

What follows is a very general list of the types of upcoming
projects. All are undergoing reviews related to NEPA,
landownership, state purchasing and contracting but could
quickly be on deck for final review and processing. Summary of
all of the projects below: $5-7 million dollars spent in the
construction and technical consulting industry. Translates
roughly into 500 jobs. (Would not necessarily be new jobs but
work for people already in the industry.)
BLM and USFS Safeguarding and Environmental Remediation Projects--$2
million in 09. Colorado AML already partners with BLM, USFS and
NPS to contract and manage these projects. Colorado AML is in a
good position to assist with funding that would be granted to
these agencies for AML work in Colorado.
Safeguarding Hazardous Mine Openings Statewide in Colorado's Mineral
Belt areas: $ 1 million in 09--Several hardrock safeguarding
projects have been developed for this year. These projects
could be out to bid in the summer season for completion in
2010.
Environmental Mine Site Reclamation--$2 -$5 million. Projects in the
following river watersheds: Colorado, Animas, Arkansas, Rio
Grande, and South Platte--all related to remediation of
environmental problems associated with abandoned mines such as
acid mine drainage, and erosion of mine and mill waste piles
into streams and rivers. This will include funding to partner
with local watershed groups to expedite design and construction
of projects. Many watershed groups have projects outlined but
have never had significant funding to get them off the ground.
Through our watershed agreements we are all in a position to
manage and construct these types of projects.
Reclamation of Forfeited Mine Sites. $500,000--Projects statewide.
These forfeited mine sites are not considered ``abandoned'',
but instead would be classified as inactive. There is not a
solvent company to clean up such sites, and the responsibility
to perform reclamation remains with the state.

Utah--the state could spend $9,471,033 on six projects in
five rural counties for an estimated 93 new jobs if total
reclamation (as opposed to just physical safety hazard
abatement only) is allowed. Hazard abatement only would be
about $525,000 with 53 jobs created.
New Mexico--the state has six projects with a total
estimated construction cost of $1.95 million that could be
undertaken within the 18--24 month time frame. There are two
additional projects with a cost of $750,000 that could also
likely meet the deadline. These costs are only for the
construction contracts, and do not include any costs for
investigation, evaluation, design or oversight. The projects
all involve noncoal and are on federal lands.
Wyoming--In the next 18 months Wyoming can put $10 to $12
million worth of projects on the ground. The number of jobs
that would be involved is harder to estimate but based on
similar sized projects it would be around 75 people but less
than 100.
Arizona--the state has Twenty-three (23) high-risk mine
sites with 81 openings which can be identified for closure in
the next 24 months. These areas typically have high use for
backcountry touring and off highway vehicle activities, and
recreational mineral collection by winter visitors, or are
located near populated areas. Many of the 23 mine sites has
several openings with depth's greater than 50 feet. These mine
sites are hardrock AML projects. The number of jobs created by
and through AML hardrock remediation is difficult to estimate
because, in general, the abandoned mines that need to be
addressed resulted from the efforts of small-time prospectors.
We would estimate the number of jobs created to be 50-100. This
number is subject to change once the momentum of closures
increases throughout the 24 month timeline. The estimated costs
are $810,000.
California--the state estimates that approximately 47,000
abandoned mines are distributed throughout California. Of
these, approximately 5,200 sites (11% of 47,000) present
environmental hazards, and more than 39,400 sites (84%) present
physical safety hazards. Some of the highest priority AML sites
(for example, Iron Mountain) are being addressed, but the
majority have not been evaluated to determine the required
cleanup actions to protect public health and safety and the
environment. In addition, there are numerous areas throughout
the Sierra, including tribal lands that are contaminated from
historic mercury use associated with gold mining. Hundreds of
millions of dollars will ultimately be necessary to remediate
all the AML sites within the State. As you know, California
does not currently receive federal AML funding as it is not a
SMCRA state.

In 2007, at the request of Senator Feinstein's office, California's
state and federal agencies working on AML issues created lists
of priority AML sites with environmental and physical hazards.
The list is being updated, but a current version is available
from the state or IMCC. This list provides a snapshot of the
known environmental, human health, and safety problems posed by
abandoned mines in California. It is important to note that
many AML sites have not yet been inventoried or assessed for
hazards. The prioritization process used for each list is
briefly outlined in the document.
Of the sites on the list, many can be considered at/near a ``shovel-
ready'' stage (i.e., projects already advanced that can put out
to bid/work begun within 18 months). Listed alphabetically
below are six of the State's priorities identified by the
Office of Mine Reclamation, State Water Resources Control
Board, and Department of Toxic Substances Control.

Argonaut Mine, Amador County (private land/low-income PRP): $2.0M
La Joya Quicksilver Mine, Napa County (private land/low- $2.0M
income PRP):
New London Mine, San Luis Obispo County (California $3.0M
National Guard):
Oro de Amador, mine tailings in Amador County (city of $5.0M
Jackson):
Plumas Eureka Mine, Plumas County (State Parks): $3.0M
150-200 priority physical hazard features on federal and $1.5M
state lands: TOTAL.................................................. $16.5M
Other priority sites would likely be provided by federal agencies
such as the Bureau of Land Management, U.S. Forest Service, and
National Park Service (an estimated 67% of California's AML sites lie
on federal land). We would like to stress that any hardrock AML funds
for California's priority AML sites should go directly to the State of
California or that the federal agencies receiving funds funnel them to
the State.
Please note, the above ``short list'' represents only a partial
list. We would be happy to work with California Senators Boxer and
Feinstein and the Senate Energy and Natural Resources Committee as a
whole to provide a complete list that corresponds to our updated
priorities. The above short list also does not address the many
abandoned mine sites that would benefit from funding for assessment
investigations prior to cleanup Should such funds be available,
California could use an additional, initial $5,000,000 to conduct
investigations at AML sites that pose immediate threats to human health
and the environment to define cleanup construction projects. State and
federal agencies would work together to conduct the investigations and
select the highest priority cleanup actions. Sites and cleanup actions
would be defined within less than a year of initiation of the
investigation work and construction contracts could be awarded using
contractors in place several months thereafter (thus, within 18 months
from the notification of funding to award additional cleanup
construction contracts).
______

Statement of Nan Stockholm Walden,
Farmers Investment Co.
[The below table of contents materials have been retained in
committee files:]

Provided by: Arizona Mining Reform Coalition:
www.azminingreform.org
Pima County, Arizona: www.pina.gov
Save the Scenic Santa Ritas:
www.scenicsantaritas.org
Hilton Ranch Organization:
www.hiltonroad.com
Center for Biological Diversity:
www.biologicaldiversity.org
Sky Island Alliance:
www.skyislandalliance.org
Coalition for Sonoran Desert
Protection: www.sonorandesert.org
Tucson Audubon Society:
www.tucsonaudubon.org
San Xavier District of the Tohono
O'Odham Nation: www.tonation_nsn.gov
Farmers Investment Co:
www.greenvalleypecan.com
RanchoSonado: (520) 398-8328

TABLE OF CONTENTS

EXECUTIVE SUMMARY
COMMENTS FROM MAJOR CONSTITUENCIES

Pima County
Congresswoman Gabrielle Giffords and Congressman Raul
Grijalva
Arizona Game and Fish Department
Coalition for Sonoran Desert Protection
San Xavier District of the Tohono O'odham Nation
Farmers Investment Co.
Rancho Sonado

POWERPOINTS DETAILING IMPACTS OF ROSEMONT MINE

Rosemont Mine: Bad for the Environment, Bad for the
Economy, Bad for
Arizona, Bad Idea
Water Impacts: Save the Scenic Santa Ritas
Biological Values: Sky Island Alliance

ECONOMIC IMPACTS

Tucson Audubon Society
Sonoran Institute Economic Study By Dr. Joe Marlow

PHOTOGRAPHS OF SANTA RITA MOUNTAINS AND ENVIRONS

Courtesy of Tom Vezo and Murray Bolesta

RESOLUTIONS AGAINST THE MINE FROM PUBLIC, NON PROFIT AND
PRIVATE SECTORS
______

Statement of the American Land Rights Association, Battle Ground, WA,
on S. 796 and S. 140
If it can't be grown, it has to be mined
s-796/s-140 job killers aka ghost town acts of 2009
As gold nears $1,000 an ounce, America's mom and pop small
prospectors and miners are protesting, ``Don't steal our American
Dream''. House vote may be near on the draconian Rahall bill (HR 699)
to end mining in western states. Its clone, S-796 is now in the Senate
Energy and Natural Resource Committee Chaired by Jeff Bingaman (D-NM).
``A way of life for hundreds of thousands of citizens and a
national asset for America would be destroyed by imprudent changes to
the present location system under the existing General Mining Law,''
said Donald Fife, Chairman of the National Association of Mining
Districts and Mining Director for the American Land Rights Association.
S-796 is a bill designed by U. S. House of Representatives Natural
Resource Committee Chairman Nick J. Rahall (D-WV) to gut the General
Mining Law.
``Enactment of S-796 would cause the loss of hundreds of thousands
of jobs and the destruction of the fragile economies of hundreds of
communities in the Western States. S-796 should really be titled The
Ghost Town Act of 2009'' said Fife.
``What's missing from the public debate is any recognition of how
dependent many American industries, especially high-technology
industries, are on mining. The mining industry in turn depends on the
exploration and development activities of many thousands of prospectors
and small-scale miners,'' Fife said.
``This is ``R and D'' for future mineral supplies, that must
produce some 40,000 lbs. of minerals per capita per year to maintain
our American standard of living. By destroying free enterprise and the
entrepreneurial incentives contained in the General Mining Law, S-796
strikes at the roots of America's economic well-being,'' Fife
continued.
Radical opponents of the General Mining Law have bombarded Congress
and the public with the most outrageous propaganda.
``The biggest myth is the claim that real estate speculators are
staking claims and then buying public land for $2.50 an acre, or the
price of a hamburger at McDonald 's. Nothing could be further from the
truth.
Thousands of mom and pop prospectors are looking for valuable hard
rock mineral deposits. Only a very few ever find a deposit valuable
enough to patent. A patent gives secure title that a small entrepreneur
needs to collateralize (finance) his development to production,'' Fife
said .
Development of a claim and the Federal patenting process can take
decades. The cost of obtaining a patent, according to U.S. Forest
Service and Bureau of Land Management sources, can cost from several
thousand to more than a hundred thousand dollars per acre. For example,
when you add all the exploration costs, such as road building,
drilling, sampling, testing, surveying, and lawyers fees the costs
skyrocket.
``Homestake Mining Company documents that during a 100-year period,
only about one mining claim in 5,000 ever became a paying mine. For
contrast the U.S. Geological Survey estimates that it takes about 100
petroleum exploration wells to find a new oil or gas discovery in North
America
It can take decades more plus additional huge investments to get
all the permits for operation and environmental reclamation that are
required before mining can begin. So, when the radical environmentalist
claim that people are stealing public land for the price of a Big Mac,
what they fail to mention is before you can buy your $2.50 hamburger,
you first must pay for and build a McDonald's franchise,'' said Fife.
``Recently, George and Ray Burton and their families of Big Bear
Lake, California received a patent to their gold claims in the nearby
Holcomb Valley Mining District 50 years after their father, Cecil
Burton, filed a patent application. All too often, bureaucrats violate
prospectors' and miners' civil rights by delaying action until after
they have died,'' said Fife.
George's and Ray's parents, who filed the original patent
application, died decades ago never, realizing the fruit of their
American Dream.
Last fall the misinformed U.S. House of Representatives passed the
draconian Rahall mining ``reform'' bill, ``Hardrock Mining and
Reclamation Act'' which is the same as the current HR-699. This bill
and S-796 dictates a 2% to 8% gross royalty on minerals produced from
mining claims, and among other things, gives regulatory agencies the
authority to reject proposed mines and to authorize citizen lawsuits.
If S-796 passes, patenting a discovery is eliminated making it
nearly impossible for small miners to finance a small mining
enterprise. It will mean the end of mineral discovery in the West.
Staking of mill sites are eliminated creating the probability that
processing facilities will be built on top of ore reserves.
In the past, royalties on high-risk mineral exploration and mining
proved to be a failure. From the early 1800's to the 1840's, the
federal government had a 5% royalty on minerals on federal lands held
in trust for the states. Favoritism and bureaucracy made it more
expensive to collect the royalty than the government received.
Chairman Rahall was recently featured in an Associated Press story
September 19, 2008. The title was, ``Interior Chief Vows to Stop Ethics
Storm.''
According to the AP wire story by Dina Cappiello, from 2002 to 2006
energy companies leasing oil and gas on Federal lands through the
Department of Interior's Denver Office, which ``is responsible for
marketing billions of dollars worth of oil and natural gas that energy
companies barter to the government in lieu of cash royalty payments for
drilling, nine of the government employees received thousands of
dollars in gifts including meals, ski and golf trips and snowboarding
lessons. Two workers accepted gifts on 135 occasions.''
After the Civil War, in 1866, a new placer mining law was proposed
with a 5% royalty. It was found that royalties imposed on mines
captured and leased by the Union Army during the Civil War were
stripped of high-grade ore and abandoned before lower grade minerals
could be extracted.
This is the same scenario S-796 will create, leaving millions of
tons of lower-grade minerals in the ground. Due to the poor track
record of the previous royalty system, Congress passed the 1866 mining
law without a royalty provision. The 1866 law was modified in 1870 and
1872 without the royalty provision, and has been modified more than 20
times since. Each of these modifications has been without a royalty
provision on hard rock minerals.
Contrary to the belief of environmentalists and others, a mining
claim is not a mine. It only gives citizens the right to look for an
economic mineral discovery. Even just ``looking'' now requires
``holding or rental fees,'' extensive and expensive bonding and is
subject to nearly endless environmental regulations.
Former Attorney General Janet Reno in an official AG Opinion to
former Senator Bennett Johnson, then Chairman of the Senate Energy and
Natural Resources Committee, declared the ``rental or holding fee''
illegal. The under the tenth amendment Supreme Court has ruled that a
mining claim with a discovery is the same as private property with an
unperfected title until the mineral patent is granted. Apparently only
subdivisions of a state such as cities or counties jurisdictions may
levy a property tax.
Once an economic mineral discovery meets the ``prudent man rule''
that is, a prudent citizen will expend his time, effort, and capital
with the reasonable expectation of development of a valuable mine, only
then does the citizen have ``discovery'' under the General Mining Law.
Most mom and pop prospectors can't qualify for a ``bond,'' so they
must come up with cash for a Certificate of Deposit as financial
assurance for reclamation. That is a huge and often too large a hurdle
for many mom and pop prospectors.
The National Association of Mining Districts represents mainly
small ``mom and pop'' prospectors who still find most of the new
discoveries despite all the new satellite and other technologies.
``Most discoveries, around 90%, are still found by mom and pop
miners,'' said Fife.
The General Mining Law is part of the American Dream. During the
California gold rush people saw in action the revolutionary idea that
an individual could search for gold and with his own labor, discover a
valuable mine and actually own it.
This was confirmation of America as land of the free. Before this
new American free enterprise way, the King and/or the State owned the
minerals. Individuals had to pay a ``royalty'' to government, if they
were lucky enough to receive permission from the King to prospect. S-
796 gives bureaucrats this same authority, eliminating the self
initiation provision of the existing law to stake a claim on a mineral
discovery without permission of the ``King'' or Federal bureaucrats.
``The existing mining law may be the last of the truly free
enterprise laws on the books,'' said Fife.
Some proponents of Rahall's ``Ghost Town Act'' claim that the land
has been prospected for more than 150 years and everything has been
found. This compares to the head of the US Patent Office in the 1890's
when he proposed closing the office, ``because everything worthwhile
had been invented.''
According to Vincent McKelvey, (Former Director of the US
Geological Survey, 1976 to 1978): ``Appraising mineral resources is an
emerging science. A final once and for all inventory of any mineral
resource is nonsense. Mineral reserves and resources are dynamic
quantities and must constantly be appraised. As known deposits are
exhausted, unknown deposits are discovered, new extractive technologies
and new uses are developed and new geologic knowledge indicates new
areas and new environments are favorable for mineral exploration.''
``As an example, the space age element gallium, when combined with
arsenic, creates a gallium-arsenide solar cell that increases the
production of electricity by 15% to 20% over silicon solar cells. This
new technology recently won the trans-Australian Solar Car Race,'' said
Fife.
``Gallium-arsenide computer chips can reportedly replace silicon
chips increasing the speed of computers theoretically by more than
tenfold. This could make the difference between winning and losing
thermo-nuclear war,'' said Fife.
In the search for uranium in the 1950's, it took thousands of mom
and pop explorationists were urged to find these rare anomalies of
nature that would supply the future demand for this and other strategic
elements. Presently gallium sells for more than $40 per ounce.
In the late 1940's explorationists, looking for uranium on the
California Nevada border in a place that had been mined for gold and
silver numerous times over 200 years since the Spanish in the 1700's,
found Rare Earths.
This discovery led to color television, efficient lighting and a
great saving of energy and jet fuel by reducing the weight of electric
motors in half and providing many other benefits to society. The only
other source of Rare Earths is in China. Rep. Rahall would have
considered this area mined out and of no use to society. This ignores
the constant upgrades in technology that make minerals really a
renewable resource because it is possible to keep going back to mineral
sites and finding economic discoveries.
The language of HR-699 is also being considered as S-796 in the
U.S. Senate Energy and Natural Resources Committee, chaired by Senator
Jeff Bingaman (D-NM). Reportedly, Senator Harry Reid (D-NV), Senate
Majority Leader, from the small mining town of Searchlight, Nevada, has
serious reservations about the negative impact on jobs and the economy
if HR-699 should become law.
The American Land Rights Association is a non-profit, public
interest membership organization dedicated to protecting the rights of
individual private property owners, including small Mom and Pop
prospectors and miners possessing rights vested under the General
Mining Law.
Randy Dunn expands on the seriousness of the lack of availability
of domestic rare earths elements. In our energy and electronic
industry, China threatens to be the dominant producer and consumer of
rare earths in the world. We need domestic exploration and discovery of
these vital elements. The general mining law of 1872 that encouraged
the rare earth discoveries of the mountain Pass California deposit is
needed for our electronics and defense industries.
The American Land Rights Association is a non-profit, public
interest membership organization dedicated to protecting the rights of
individual private property owners, including small Mom and Pop
prospectors and miners possessing rights vested under the General
Mining Law.
attachment.--randy dutton's letter to the editor
Absence of mining endangers alternative energy future.
Americans will be held hostage to Chinese for the very
alternative energy devices now being promoted.
Rare Earth Limit to Alternative Energy
A battle is raging of which few are aware. And progressives,
in their naivete, are ensuring America will lose it. For years
now progressives have been blocking carbon based energy
development while promoting alternative energy. A world powered
by wind, wave, solar, and advanced electronics they told us
will make America energy self-reliant, and no longer a pawn of
the Middle East. All the while, these progressives and
similarly minded courts blocked US based mining of minerals,
and both conservative and progressive politicians have so
indebted America we're losing control over our own assets. This
now has set the stage for a major conflict.
China, flush with American cash from our spending spree and
continued borrowing, now controls about 97% of the world's rare
earth metals. What China doesn't control from domestic
production, they've bought up in other countries, including
America, and now China is cutting exports.
What are rare earth metals, and who cares you ask? Well these
17 elements are essential ingredients for many of the high tech
components necessary for consumer electronics, lighter weight
permanent magnets as used in electrical generation, weapons
systems, aircraft, and some rechargeable batteries such as used
in electric vehicles. If you have a Blackberry, LED TV, or cell
phone, rare earth metals are contained within.
It is believed that soon after 2012 China will consume all
the available production of rare earth metals thus making
virtually none available for foreign based manufacturing--
meaning, American commercial and military productions may be
out of this key ingredient. Once again America is held hostage
to a resource supplier, this time China.
How often have you heard that mining and oil drilling are bad
and that we can develop alternatives that will drive our
economy and make our lives better? What future do you think
exists for our children when we have no fossil fuels to rely
upon because we refused to invest in their extraction, and the
alternative energy we were told would save us, becomes too
expensive to mass produce?
What will we do when the only wind turbine supplier is China,
and our money has devalued to the point we can't buy any? Our
likely future results from politicians who don't understand
science or economics. What is certain is that they understand
lobbyists and political dealing. Their financial futures likely
already are secure, but the same cannot be said for our
children. The only chance we have is for the public to wake up
and understand that our future is in American self-reliance--
not government control.
We must accept that survival means being producers--from the
raw materials, to advanced components, to finished products. We
must stop relying upon a dysfunctional government and career
politicians to bail us or anyone else out with our own money.

Randy posts these letters at his blog on the GHGOP.org website at
http://www.ghgop.org/conservativevoice/ConservativeBlogs/tabid/59/
Default.aspx
______

Statement of the Holcomb Valley Mining, Fawnskin, CA, on S. 796 and S.
140
The Holcomb Valley Mining District was established in 1860 after
William F. Holcomb discovered gold here on May 4, 1860. More than $100
million in gold has been mined since that time and numerous gold
deposits still exist in the district. Gold at near $1,000 per ounce has
created a flurry of activity. As in the great depression the unemployed
are out taking advantage of the 1872 Mining Law by staking claims and
panning enough gold to feed their wives and kids.
Since the 1947 discovery of the Lucerne Valley Limestone Province,
high-grade limestone has over shadowed gold production. Presently the
district is the largest producer of cement and other limestone products
in the western United States. There are only four other high-grade
limestone districts in the entire United States.
Local limestone production is more than 5 million tons per year and
worth more than $300 million dollars per year FOB mine. This raw
material supports several thousand jobs in California and neighboring
states. The value added to the economy is greater than one billion
dollars per year. All the cement to build Glen Canyon Dam on the
Colorado River came from this mining district. Eighty percent of cement
is limestone. Ultra high grade filler extender limestone saves imported
crude oil used to make resin feed stocks for paints and plastics.
Ultra high grade limestone is made of calcium carbonate, currently
in demand to fight the epidemic of osteoporosis affecting our aging
population. All of these benefits and many more to American society are
the result of the incentive to take risks to explore, discover and
develop minerals under the 1872 mining law!
The Holcomb Valley Mining district is made up of mom and pop miners
and prospectors as well as the Cushenbury Mine Trust--a Dental, Vision
and Life Insurance Fund for the union workers who lost their jobs when
the Kaiser Steel Mill in Fontana and the Eagle Mountain Iron Mine were
closed and forced into bankruptcy by overzealous environmental
regulations and Japanese dumping of steel at less than the cost of
production in the late 1970's and early 1980's.
The Cushenbury Mine Trust was created by agreement between the
former Kaiser Steel Corporation and the United Steel Workers of America
(AFL-CIO). The union workers acquired eleven thousand (11 thousand)
acres of mining claims of the former Kaiser Steel Corporation in the
San Bernardino Mountains for their insurance fund assets. The
Cushenbury Mine Trust has sold or is now selling limestone to Specialty
Minerals, and OMYA, and regional cement plants, Mitsubishi, Riverside
and Cemex. Mining income goes to several thousand beneficiaries for
life insurance and for dental services, eye exams, eyeglasses, eye
surgery, and for white canes and guide dogs for blind union members and
their families' death benefits.
If allowed to expand mining operations, the trust would increase
benefits to union beneficiaries. S-796 dictates a 2% to 8% gross
royalty on minerals produced from mining claims gives regulatory
agencies the authority to reject proposed mines and to authorize
citizen lawsuits even if permitted, the royalty would eat away benefits
to the union workers.
Senator Feinstein's' companion Abandon Mine Act S-140 proposes to
take an annual holding fee and another 1.5% additional royalty from
claim holders like the Cushenbury Mine Trust. Senator Feinstein's'
proposed increase per claim of $300 per year is a certain death to
mineral discovery, exploration and development, there will be very few
claims to tax and little to no royalty for the abandon mine fund.
Ninety-nine percent of unpatented mining claims have a negative cash
flow while expending exploration and development funds. For mom and pop
prospectors and small miners who find most of the original discoveries,
it can be sweat equity and a portion of their social security pension.
If S-796 passes, patenting a discovery is eliminated making it
nearly impossible for small miners to finance a small mining
enterprise. It also destroys the prospector right to self-initiation,
which eliminates the bureaucracy giving permission to explore and stake
claims. Staking of mill sites are eliminated, creating the probability
that processing facilities will be built on top of ore reserves.
Endless current regulations have already greatly suppressed new
exploration and discoveries. Passage of either S-796 or S-140 will mean
the end of exploration, discovery, development and new mines in the
west and Alaska.
In the past, royalties on high-risk mineral exploration and mining
proved to be a failure. From the early 1800's to the 1840's, the
federal government had a 5% royalty on minerals on federal lands held
in trust for the states. Favoritism and bureaucracy made it more
expensive to collect than the royalty than the government received.
Confederate mines captured by the Union Army were leased out at high
royalty rates. The high grade ores were stripped out leaving thousands
of tons of lower grade ore in the ground. S-796 and S-140 make the same
provisions, and will do the same.
House National Resources Committee Chairman Rahall was recently
featured in an Associated Press story September 19, 2008. The title
was, ``Interior Chief Vows to Stop Ethics Storm''. It exposed the
Department of Interior employees managing the oil and gas leasing
system who took bribes more than 135 times!
The 1872 mining law boosts economy; changing this law would hurt
the industry and cost jobs all over the country. Opponents of the 1872
Mining Law typically engage in class warfare: pitting ``Big Mining''
(capitalists) against the bureaucracy allegedly representing the little
people, this creates a false image by ignoring the hundreds of
thousands of little mom and pop prospectors and small miners who are
trying to prospect and inventory America's rare anomalies of nature
called economic mineral deposits.
Ironically mineral exploration is not incompatible with wilderness
as vast areas are need to search, but only a relatively small area is
needed for extraction. Designated wilderness is incompatible with
mineral or energy production because it is now a crime to even look.
Radical environmentalists have peddled the myth that the mining law
is just another government giveaway for long that even the sensible
people at the New York Times and other media now believe it. ``Big bad
companies are stealing our land for $5 an acre!'' If you believe that,
call Interior Secretary Salazar to claim your piece of the pie. You'll
learn it can cost millions to patent a single claim.
No federal royalty is currently levied on mineral production.
Canada, Mexico, Australia and Chile don't charge royalties, either. The
General Mining Law of 1872 is eighty six (86) years younger than our
Constitution and amended just as often. The current law provides
incentives for people to discover and develop hard-rock minerals on
federal lands. In effect, it encourages risk-takers to create wealth
out of nothing, just as the protection of patent laws, encourage
inventors.
Make no mistake; mining is risky business! Lifetimes are spent
prospecting. Frequently it takes several generations to bring a deposit
into production. It is naive to believe just any claim can be brought
into production within 5 or 10 years. It commonly takes 15 to 20 years
under existing regulations and law. The Burton family of Big Bear Lake,
California waited 50 years for their U.S. mineral patent here in the
Holcomb Valley Mining District. Citizen lawsuits authorized by S-796
will add years to the permitting process.
According to Homestake Mining Company, it takes 5,000 claims to be
explored and tested to find one profitable mine. This means there is a
negative cash flow on the other 4,999 claims principally owned by mom
and pop small explorationists. Once a discovery is made, it can take 10
to 20 years and millions, even billions, of dollars to get a mining
project going with endless environmental regulations. These investments
employ thousands of Americans at the (highest wages of any industry).
Building sophisticated heavy equipment used in mining provides
thousands more good jobs across the nation. Bingaman and Rahall insist
that a 2% to 8% gross royalty plus tons of new regulations won't harm
the industry.
The S-796 and S-140 are job killing machines. Large Mining
Companies will just move overseas to countries like Australia, Canada,
Chile or Mexico where they understand royalty at the ``mine mouth''
leads to leaving millions of tons of lower grade ore in the ground.
Wealth that will never be brought into the economy to be taxed.
The hundreds of thousands of Americans involved in domestic
exploration, discovery, development, production and mining equipment
manufacturing will be left behind. One mining job usually creates 15-20
jobs in the general economy. In addition the domestic tax base will
tend disappear along with mining.
Tens of thousands of people who have invested time and money under
one set of rules now find that Congress is about to change the rules
retroactively. The results: mines closed, jobs lost, future projects
abandoned. Let's not export another vital American industry overseas.
Let's save the existing mining law. It's not broke, don't fix it!
Further, don't send anymore American jobs overseas.
______

Statement of the Pueblo of Laguna, Laguna, New Mexico
The Pueblo of Laguna (``Pueblo'') is the site of what was
once the world's largest open pit uranium strip mine: the
Jackpile Mine.
The U.S. Atomic Energy Commission was the primary purchaser
of uranium from the Jackpile Mine during the operation of the
mine between 1953 to 1983.
Two surface water tributaries near the mine and the Rio San
Jose have since tested positive for radiation contamination.
Groundwater is also at risk for radiation contamination.
Water is scarce and precious in our arid part of New Mexico;
thus contamination of our water resources is devastating to our
people and the entire region.
Pueblo of Laguna urges reformation to the Mining Law of 1872
The Pueblo has spent over 50 years dealing with the impact
of uranium mining and knows first hand the hardships suffered
by communities in the proximity of such hardrock mines. It is
for this reason that the Pueblo urges you to support
legislation reforming the Mining Law of 1872.
The bill should include provisions for funding its
objectives through royalties paid by hardrock mining
operations.
The bill should also include four provisions that the Pueblo
considers to be particularly prudent, useful, and of great
importance, as follows:

--Set new environmental standards for hardrock mining on federal
lands, many of which adjoin indian country and share water
resources essential to tribes' health and welfare.
--Establish a hardrock reclamation account for clean-up of hardrock
mines, many of which now leach dangerous pollutants from
pits, tunnels, and tailing piles into surface and ground
water on tribal lands. The secretary should be permitted
use that account for reclamation and restoration of land
and water resources adversely affected by past mineral
activities on [federal and tribal] lands. the funds should
be available to the tribes themselves to undertake
reclamation activities. After years of arco (successor to
anaconda) denying responsibility for cleanup of the
jackpile mine and reclamation, the pueblo received $43
million to reclaim the land, although an environmental
impact statement estimated that it would cost $400 million
to successfully reclaim the mine. The pueblo's reclamation
project was the first attempt in the world to reclaim an
open pit uranium mine, without any existing standards for
reclamation. To this day, we have lingering environmental
issues and are seeking funds to address them.
--Establish a hardrock community impact assistance account fund to
help communities, including tribal communities, that have
been adversely impacted by pollution from hardrock mining.
The account should provide assistance for the planning,
construction, and maintenance of public facilities and the
provision of public services to indian tribes that are
socially or economically impacted by mineral activities
conducted under the general mining laws.
--Provide tribes a voice in the decision to grant or deny hardrock
mining permits. The bill should allow tribes to petition
for withdrawal of federal land from the general mining
laws, including petitions based on value of a watershed to
supply drinking water, wildlife habitat value, and
cultural, religious, or historic resources that are
important to the indian tribe.
______

Statement of Patrick Hurley, Grass Valley, CA, on S. 796
I oppose S 796, the Hardrock Mining and Reclamation Act of 2009, as
this legislation is detrimental to America's economic well-being, and
will descimate the mining industry. For over forty years I have trying
to turn my hard rock mining claims into an operating mine. During this
time I have spent endless hours, tens of thousands of dollars, trying
to turn my mining claims into an operating mine. If successful I will
supply our nation with rare earth minerals and gold. Three years ago I
discovered that one of the footwall quartz veins contained rare earth
minerals. Under the General Mining law I am able to operate. Without
this law my operations will cease and I will not employ miners who make
around $65,000.00 a year and pay taxes.
Prospectors and small-scale miners like me find 90% of our mineral
resources not large mining corporations. I put up surety bonds in order
to operate and once I reach a certain size I have to operate under
California's CEQA Law, which has the strictest water quality and
reclamation regulations in the country.
To patent my mining claims so I have secure title to obtain
financing to get in production will cost several thousand to a hundred
thousand dollars per acre. These are US Forest Service and BLM source
estimates. These exploration costs include road building, drilling,
sampling, testing, surveying and attorney fees. The patenting process
can take decades and the cost you pay for the land is negligible, Raise
the price the patent applicant pays per acre to two thousand dollars
and it still pales to the rest of expenses.
Even in China an entrepreneur is left alone during the incubation
period of a factory or business. Only when it is successful do they
step in to get their share. In an American miner's case the government
gets minerals for technology, jobs that pay taxes and if I show a
profit I pay taxes.
Again I ask you to not enact S 796. Please leave the General Mining
Law as it is. States like California already have all the environmental
and reclamation concerns covered.
______

Statement of George Copenhaver, PG, CEG, San Diego, CA, on S. 796
Please accept my testimony in opposition to S.796 Hardrock Mining
And Reclamation Act of 2009.
I do this as an American whose family fought in the Revolutionary
War to oppose Crown constraints on many freedoms that we now hold dear.
The 1872 Mining Law encouraged (and still does) individuals to
explore for valuable minerals on Pubic Lands at their own cost and
labor. The existing law should not be modified any further. If it is,
there are vast areas in the western States that will be effectively
locked up against private (and Public) exploration. In other words, you
will have reversed mineral exploration over 200 years to King George's
time, where only the politically influencial few could posess,or
extract, minerals.
In contrast, the Canadian government continues to encourage mineral
exploration. I recently joined the PDAC (Prospector-Developer
Association of Canada). It is ironic that the Canadian government
(formerly under British rule) supports mining exploration and
communicates the its values to its citizenry.
______

Statement of Peter J. Clarke, Exploration Geologist, Reno, NV,
on S. 796 and S. 140
Would you please forward this letter to the Committee on Energy and
Natural Resources now deciding the future of mining in the United
States of America, with the legislation contained in Senate bills S.
796 and S. 140.
I am an exploration and mining geologist with over 40 years
practical experience with the last 20 years based in Nevada.
Our country has serious economic problems at present brought on by
politically motivated, economically shortsighted decisions over the
past few years. Unfortunately, the majority of in Congress empowered to
make long-lasting economic decisions are lawyers, and inexperienced in
business. Just today I read how Socrates came to understand that he is
a wise man because he knows his own ignorance. Be wise.
The US is a very large country, and mining is a very diverse
industry. Legislation drafted to suit Vermont or West Virginia can be
very damaging to Nevada, Idaho or Utah and Arizona. Environmental
issues are well controlled by existing amendments to the Mining Law and
by State agencies. If any change is made it should result in shifting
more power to the states from federal control. Local legislation works
best.
The hope of royalties as a source of revenue to the Federal
Government at the expense of the States and Counties is troubling.
Metal prices are cyclic, controlled by supply and demand on the world
market. Royalties add to the cost of production that will raise the
cut-off grades and eliminate mining lower grade material. Raising costs
will cause shutdowns during the down cycles, and once closed an
operation is not likely to reopen. Production, employment and tax
revenue are all shut off. Longer term we all lose.
You have the power to harm the western economy, and make us even
more dependant on countries such as China and the Democratic Republic
of Congo for our security. Please don't do it!
______

Statement of Michael A. Patterson, President, Cerro Gordo Mining
District, Keeler, CA, on S. 796 and S. 140
My name is Michael Patterson. I am a 62 year-old veteran and
private businessman. I have been a California General Building
Contractor and Real Estate Salesperson. I became a co-founder and CEO
of three renewable solar and wind energy companies in California,
beginning in 1979. For a brief period I was chairman of the Kern County
Wind Energy Producers Association during the mid-1980's. I have been
directly involved and participated in the fight against desertification
and environmental degradation in the Owens Valley of Eastern California
for over 20 years. I have been a principal in the mining industry in
California since the mid-1980's to date, as both general manager and
now owner of Cerro Gordo Mines, a nationally important historical poly-
metallic mining district. I have been co-restorer of the famous Cerro
Gordo Ghost Town for the past 25 years. I am currently the president of
the Cerro Gordo Historical Society, an educational not-for-profit 501
(c) (3) corporation, that has been working to build a mining museum
within the Cerro Gordo Ghost Town for roughly a decade.
I have witnessed California lead the world in the development of
renewable industries, most notably the Wind Energy Industry. Though
Congress supported the early development of the U.S. Wind Energy
Industry, subsequent congressional actions, at the behest of special
interests, stripped away that leadership, with advantage going overseas
to Danish, Dutch, Spanish, Japanese and other off-shore industrialists
and financiers. Over two-decades later, the U.S. wind-industry is
struggling to reemerge in the leadership role that was warranted and
only recently have partial successes been achieved; successes that have
been retarded again by the current recession.
Beginning in 1849, California and then the west led the world with
development of the modern mining industry. The U.S mining industry is
the most educationally, technologically and environmentally advanced
mining industry among the nations. Together, with water and
agriculture, mining led the way for California to become one of top-ten
most wealthy geo-political regions of the world. Even California's
Silver Screen and Silicon-Valley has been totally dependent on mining.
Today, California's political climate, (which is largely unfriendly to
both agricultural water-users and the mining industry and
disproportionately friendly to urban development), one can point to the
issuance of governmental ``IOU'' certificates in lieu of universally
recognized (though now globally maligned) paper currency or even the
historic currencies of gold or silver, because enough ``taxes, licenses
and fee's'' cannot be collected to support California's habits. ``As
goes California...so goes the nation.''
It is not new information that nearly all of the private sector
within the United States of America is reeling from acts it believes
has been perpetrated upon it's citizenry by unethical businessmen,
bureaucrats, politicians and special interest groups posing as
benevolent members of our society, in order to achieve advantage over
the private sector and it's properties, for their own personal,
corporate and political gain.
While the accounting of our economy includes those monies that are
recycled through the budgets of every public sector entity in our
country, the primary generators of all wealth in our country are found
in our system of property rights and the legally created ownerships of
all animal, mineral and vegetable resources at our moral disposal, held
in title by the private sector and managed in trust by the public
sector.
If we are to replace the private sector as the primary generator of
all of our country's wealth, with wealth created by our national
governments and our state governments; (our bureaucrats, politicians
and the special interest groups that often seem to seduce and persuade
all three branches of both our elected and appointed officials,
including the judiciary, it seems), we are unwisely entering into a
societal experiment that has failed in every example in the history of
the world.
If our private sector is so immoral as to require the public sector
to manage our private sector's affairs, for the private sector's own
good, then the benevolence of the public sector must be unerringly
universal and must be without blemish in order to achieve the social
``justice'' the public-servants are mandated to perform, as integral to
their job description , rather than achieving the more desirable state
of being our citizenry's champions against social ``injustices.'' I
don't believe world history supports the possibility of that
conclusion. Our own country is the best example in history where the
private sector has steered the public sector, through a winding moral
course where the fight for ``rights'' and the fight against the
``injustices'' of kings, dictators, despots and political deviants,
have proven time and again the very best way to manage our cumulative
business.
You are probably asking yourself what all this has to do with S.
796 and S. 140. The answer is this: Today brave American's in the
private sector are struggling to regain their confidence and their
economic footings in a deepening and lasting recession. Again, it is
only the private sector that creates any property-derived capital and
measurable wealth. Any legislation that diminishes the private sector
will, by nature be magnified many times over as our collective monies
are circulated and absorbed into the burgeoning public sector and it's
natural tendency to over-regulate and blindly legislate.
We need you, our elected leaders, to step off that slippery slope
and do everything in your power to limit the public sector's influence
to it's smallest effective component and to allow the private sector to
be as creatively successful as we have been historically. Please help
Americans get over the perception that our state and national leaders
are behaving far too casually, with ``business-as-usual'' and are not
personally reading every word of any proposed legislation that comes
into their work-place. Please vote ``NO'' on bills like S. 796, dubbed
the ``Ghost Town Act of 2009'' and S. 140 the ultra expensive and
unnecessary ``Abandoned Mine Act'' (and incidentally and equally or
even more importantly, S. 787, the astonishingly ill-advised ``Clean
Water Restoration Act'').
God Bless America. Thank you.
______

Statement of Frederic C. Johnson, III, PG, Utah Licensed Professional
Geologist, Virgin, UT, and President of Industrial Mineral
Developments, Inc., Las Vegas, NV
Honorable Chairman Bingaman and Members of the Committee, thank you
for this opportunity to discuss the ramifications of S. 796 and S. 140
upon the U.S. Mining Law.
I am testifying as a licensed geologist with over 35 years
experience in the minerals industry with emphasis on industrial
minerals. I currently work with Industrial Mineral Developments, Inc.
from Nevada to assist small, medium, and large mining companies with
permitting and moving their mining claims toward the development of the
mineral in the ground. I am also Vice President of the Cerro Gordo
Mining District, California and a member of the National Association of
Mining Districts.
Legislating changes to streamline the regulatory environment of
mine permitting through the bureaucracies is even more important than
the proposed changes to the General Mining Law that has been amended
many times (more recently 1974, 1976, 1981, and 2001) by regulations. A
critical part of any legislation regarding the U.S. Mining Law should
be studying and insuring the viability of this vital U.S. industry
prior to and within the language of any legislation. S. 796 and S. 140
unfortunately overlook priority one. This first priority should be to
study and address the ramifications of the proposed bills on national
security and the socioeconomic viability of local, state, and national
economies.
In the rush to get more tax money out of the mining industry with a
``one bill fits all'' solution all minerals will get the same treatment
and this could drastically damage the mining industry in this country.
Large metal mines are different than small metal mines. Large non-metal
industrial mineral mines are different than small non-metal mines.
Surface mines are different than much more expensive underground mines
that will be needed in the future. All of these factors should be
weighed when determining the economic viability of mining and
extracting more taxes and royalties from the industry. S. 796 and S.
140 `s new federal royalties and fees on top of those already paid to
the states will force mining companies of metals, precious metals, and
vital industrial minerals such as limestone, gypsum, feldspars,
dolomites, talc, borates, and important ``green'' energy rare earth
minerals to locate operations outside the United States. Obviously this
will increase end user prices, energy costs, and US dependence upon
foreign sources for almost everything we use everyday. The proposals
within these two proposed bills will drastically hurt the mining
industry and the United States at a critical time in its economic
history. `` If it can't be grown, it has to be mined.'' Now is not the
time for dangerous economic legislation!
I am sure that most of this Committee's members understand that
many ingredients of our everyday items come from mining (toothpaste,
ice cream, cars, jet engines, tires, insulation, building rock,
television components, computers, plastics, etc. etc.); therefore, it
should be obvious that the mining of just one mineral does not supply
this. It should also be obvious that some minerals have higher profit
margins than others. In fact some locatable minerals such as gypsum for
building wallboard or limestone could not withstand any royalties.
Some would like Congress to believe that the gold industry is the
main industry governed by the Mining Law of 1872, but this is an
obvious untruth. All locatable minerals are governed by the Mining Law
as amended and a great many of these needed minerals work on marginal
profits within this country's highly regulated mining environment.
Reform to help or reform to hurt? I guess the decision is whether
to legislate to maintain a highly regulated, efficient, and safe mining
industry in the United States or to legislate royalties, fees, and
burdensome regulations for agencies and industry that will send our
country's jobs and economy overseas to countries that do not care about
the environment. We are already at the brink of losing the revenue
because mining companies are leaving the U.S. due to high taxation and
long lee times for permitting in the U.S.
All of this comes at a time when our country needs to be ramping up
its exploration for those minerals of the future that will help us
become energy independent and environmentally friendly. It is
disturbing to see a country put itself out of business by adopting
short sighted over regulation and land management practices that deter
the research and development (exploration) necessary for the future. It
is this incentive to explore in the United States that is not addressed
and is hurt by some of the proposals within S. 796 and S. 140.
Please consider implementing the following concerning S. 796 to
help the industry and our great country:

1. Please do not have multiple fees and royalties (royalty,
land use fees, abandoned mine fees) because the industry in the
locatable mineral states is already taxed (pay royalties) to
the public through the states on their mining and production.
Additionally, financial assurances are required, US Fish and
Wildlife fees are usually extracted, and county and state
permitting fees are extracted. It is not true that the mining
industry is just like any other public land user. No other user
hunter or fisherman gives so much back to the country in
fueling economy and job growth. History has proven royalties a
failure because companies will leave potentially valuable
reserves in the ground due to royalty inflated cut-off grades
for ore.
2. Please understand that mining economy is cyclical;
therefore, the idea that much of the mining industry can absorb
many extra costs is simply not true.
3. Please consider not implementing any royalties on
industrial non-metallic minerals due to their high capital
costs and low profit margin. Consider that the states already
tax mining entities on their production.
4. Please consider one-time fees for abandoned mine
reclamation fees rather than taxing production. In the states,
production royalties are already put into abandon mines
programs. The federal government needs to interact with the
states to insure that there is not double jeopardy in taxation
on the mine owner.
5. Please note that the overstated ``token payment of $2.50
to $5.00 per acre'' to patent land is a dissemination of
misinformation promoted by well-funded enemies of the mining
industry. I have personally been involved in the patent process
with a medium sized industrial mineral company in the western
U.S., and this process took 15 years and many thousands of
dollars per claim in legal fees to complete. S. 796 removes the
protection of invested assets by outlawing patents; however, it
gives no protections to those who have invested.
6. Regulations since 1993 have put smaller miners at a
distinct disadvantage to the larger operations in exploring and
discovering new mineral deposits by only allowing them to
waiver 10 mining claims from fees that they can only afford to
put into their claimed area on the ground. The waiver should be
for at least 25 claims.
7. Please put a time limit on the agencies response to permit
requests to streamline the permitting process. This time line
was implied in the 1981 version of 43 CFR 3809 regulations and
was dropped in the 2001 re-write. The length of time to permit
is too long and costly to industry and the agencies. It would
be nice if the bureaucracies in our country were set up to work
like businesses motivated by success rather than otherwise.
This needs fixing.
8. If any royalty is enacted by this legislation, only the
larger producers of the higher profit metals industry could
afford a net royalty such as S. 796 proposes. There needs to be
cap on how much production would qualify for royalty. In the
past royalties have not worked well.
9. Language permitting exploration activities Section 302 in
S. 796 should be taken out of the bill because the BLM and
States have adopted effective and efficient procedures for
small-scale exploration operation. The only change necessary
would be to clarify the language in 43 CFR 3809 that applies to
Notice Level operations where it allows 1000 tons with less
than 5 acres disturbance for testing which is confusing
language. Any new legislation should clarify that a Notice
level operation could have exploration and small mining to test
and/or sell minerals from a financially assured 5 acres or
less. Many times with industrial minerals, 1000 tons is not
enough to explore all the market variables. The present
language suggests that it would take 5 acres to acquire 1000
tons of rock, and this is highly unlikely.
10. Please review and clarify the confusing Section 102(8)to
ensure that payment of maintenance fees insures all the rights
traditionally associated with unpatented mining claims. This
section should not mean that exploration is contingent upon
having a mining claim. The law should provide for secure rights
to use and occupy the federal lands for mineral purposes by
paying the maintenance fee or doing assessment work with a
waiver.
11. The mining maintenance fee of $300 in S. 140 is too high.
Interior is already raising the fees. Small miners need more
claims for their waiver.
12. Please note in any legislation that the 30 U.S.C. Section
22 Rights of Self Initiation and Entry are preserved. S. 796
does not guarantee this right or give security for tenure and
investment.
13. Please recognize that the current framework of federal
and state environmental regulations and laws provide effective
regulation for all aspects of mining, reclamation, and mine
closure.
14. S. 140's gross royalties will result in significant mine
closures and should not be considered.
15. A reclamation fee and land use fee are on top of other
fees that do the same thing and are additional burdens upon an
industry in uncertain times.
16. The mechanisms for land withdrawals in S. 796 can only
confuse and hurt the industry in all aspects. Withdrawals
should be proposed and brought through the processes that BLM
is allowed under FLPMA. These new mechanisms can remove mineral
rich land from the exploration database. New mineral species
found in new ground could be the next saving grace for the free
world just like the finding of new animal species can be the
next great cure. Therefore the continued removal of the
shrinking federal land base from exploration has dire
consequences for the future. A mining law bill is not an
appropriate place to set up of a new withdrawal system for the
Department of Interior. Please drop these provisions.
17. Please consider dropping Section 102(a)(4)(B) from the
S.796 proposed bill. This bars relocation of a dropped claim
for 10 years. This does not take into account the many reasons
for dropping and reacquiring claims. In fact dropping a claim
and reacquiring it to correct defects or surveying errors or
types of claim is more expensive than simply paying the
maintenance fee. There is no reason for this provision other
than to confuse and complicate the existing law and the
proposed law.
18. The language in Section 506 c should be re-worded as it
implies that this S. 796 completely replaces the Mining Law and
all the adjudication and precedents that have gone before.
19. Many of the environmental provisions are addressed in
existing regulation and are not needed or are confusing in this
S. 796 bill.
20. Uranium should remain a locatable mineral because of the
extensive exploration and research and development needed for
discovery and production. Moving this mineral to a leaseable
will hurt the uranium industry at a time when exploration needs
to be ramping up to supply alternative energy.

The mining industry in the United States creates jobs and healthy
communities; however, many of the aspects of this proposed legislation
would add to unemployment in our country and increase costs of many
essential minerals to the consumer at a time when economic help is
needed in the private sector. S. 796 and S. 140 as written are actually
bills for the government to extract more fees and not bills to help
anything about the industry or the present economic crises.
In November of 2007, then candidate and now President Barack Obama
stated that essentially the same proposed Mining Law legislation as S.
796 ``places a significant burden on the mining industry and could have
a significant impact on jobs.'' He also opposed the proposed fees in
the 2007 legislation.
Abandoned mines should be addressed by commissions to interact with
existing state plans, fees, and regulations and should be paid for by
one time specific fees that do not tax production any more.
Thank you again for this opportunity to testify with my expertise
on proposed changes to this vitally important industry.
______

addendum.--statement of frederic c. johnson, iii
Honorable Chairman Bingaman and Members of the Committee, please
accept this addendum to my testimony regarding S. 796 and S. 140.
Additional ramifications of the royalties and fees proposed by
these bills is that mining leaving the United States for other
countries will leave China in sole control of the rare earths mineral
industry. No one will be here to explore and develop the known rare
earth deposits in the U.S. that have been made politically unavailable.
Unknown to many China and Turkey are also poised to control about 80%
of the borate production in the world.
Rare earths are extremely important in high speed computer and
television technology and borates are essential to glass, fiberglass,
and heat treated glass products. The heat shields on the space shuttle
are made from borates and borate is an important radionucleide blocker
for nuclear reactors.
One of the great unknowns to the general U.S. public is that our
country does not produce very much of anything anymore and that mining
is one of our only remaining production industries. The very few raw
material commodities that U.S. mining produces will be further
curtailed by implementation of excessive royalties and fees.
The problem with this is that the United States will then have to
depend upon China and other countries to supply their future raw
materials as there will be little or no mining in the U.S. China is
already decreasing exports of rare earths needed for the new energy
systems because it is supplying their own country's economy.
This is not the time to build more dependency by running business
off. It is doubtful that the United States can remain a leader of the
free world when it cannot produce.
The Mining Law as amended (many times) is no longer an antiquated
law. In fact, it is one of the few laws that are working to help
rebuild the economy of our country.
Please think about it and do not pass S. 796 and/or S. 140 with
their royalties and fees.
Thank you for your reasonable consideration of the facts and common
sense logic that does not harm what is working well.
Abandoned mines legislation should focus on working with the states
on their plans to address the problems.
______

Statement of Janet L. Liberty, Chelan, WA
Before you vote ``for'' S 796 Mining Law, please consider all of
this Testimony which has been researched with complete honesty and
integrety. Please do not vote on any bill that you have not read
completely and do not understand the impact it could have on ``we the
people.''
``A way of life for hundreds of thousands of citizens and a
national asset for America would be destroyed by imprudent changes to
the present location system under the existing General Mining Law,''
said Donald Fife, Chairman of the National Association of Mining
Districts and Mining Director for the American Land Rights Association.
``S 796 is actually a bill designed by U. S. House of
Representatives Natural Resource Committee Chairman Nick J. Rahall (D-
WV) to gut the General Mining Law.
``Enactment of S 796 bill would cause the loss of hundreds of
thousands of jobs and the destruction of the fragile economies of
hundreds of communities in the Western States. ''S 796 should really be
titled The Ghost Town Act of 2009'' said Fife.
``What's missing from the public debate is any recognition of how
dependent many American industries, especially high-technology
industries, are on mining. The mining industry in turn depends on the
exploration and development activities of many thousands of prospectors
and small-scale miners.'' Fife said.
``This is ``R and D'' for future mineral supplies that must produce
some 40,000 lbs. of minerals per capita per year to maintain our
American standard of living. By destroying free enterprise and the
entrepreneurial incentives contained in the General Mining Law, S 796
strikes at the roots of America's economic well-being.'' Fife
continued.
``Radical opponents of the General Mining Law have bombarded
Congress and the public with the most outrageous propaganda.
``The biggest myth is the claim that real estate speculators are
staking claims and then buying public land for $2.50 an acre, or the
price of a hamburger at McDonald's. Nothing could be further from the
truth.
``Thousands of mom and pop prospectors are looking for valuable
hard rock mineral deposits. Only a very few ever find a deposit
valuable enough to patent. A patent gives secure title that a small
entrepreneur needs to collateralize (finance) his development to
production.'' Fife said.
``Development of a claim and the Federal patenting process can take
decades. The cost of obtaining a patent, according to U.S. Forest
Service and Bureau of Land Management sources, can cost from several
thousand to more than a hundred thousand dollars per acre.''
For example, when you add all the exploration costs, such as road
building, drilling, sampling, testing, surveying, and lawyers fees the
costs skyrocket.
``Homestake Mining Company documents that during a 100-year period,
only about one mining claim in 5,000 ever became a paying mine.'' For
contrast the U.S. Geological Survey estimates that it takes about 100
petroleum exploration wells to find a new oil or gas discovery in North
America
``It can take decades more plus additional huge investments to get
all the permits for operation and environmental reclamation that are
required before mining can begin. So, when the radical environmentalist
claim that people are stealing public land for the price of a Big Mac,
what they fail to mention is before you can buy your $2.50 hamburger,
you first must pay for and build a McDonald's franchise,'' said Fife.
``Recently, George and Ron Burton and their families of Big Bear
Lake, California received a patent to their gold claims in the nearby
Holcomb Valley Mining District 50 years after their father, Cecil
Burton, filed a patent application. All too often, bureaucrats violate
prospectors' and miners' civil rights by delaying action until after
they have died,'' said continued.
``George and Ron's parents, who filed the original patent
application, died decades ago never realizing the fruit of their
American Dream. Fife said.
``Last fall the misinformed U.S. House of Representatives passed
the draconian Rahall mining ``reform'' bill, ``Hardrock Mining and
Reclamation Act'' which is the same as the current HR-699 in the House.
This bill and S 796 dictate a 4% to 8% gross royalty on minerals
produced from mining claims, and among other things, gives regulatory
agencies the authority to reject proposed mines and to authorize
citizen lawsuits.'' Fife continued.
``If S 796 passes, patenting a discovery is eliminated making it
nearly impossible for small miners to finance a small mining
enterprise. It will mean the end of mineral discovery in the West.
Staking of mill sites are eliminated creating the probability that
processing facilities will be built on top of ore reserves.
``S 796 even retroactively eliminates patents depriving miners of
years of work counting on the law as it is now written.
``In the past, royalties on high-risk mineral exploration and
mining proved to be a failure. From the early 1800's to the 1840's, the
federal government had a 5% royalty on minerals on federal lands held
in trust for the states. Favoritism and bureaucracy made it more
expensive to collect the royalty than the government received.'' Fife
continued.
House Natural Resources Committee Chairman Rahall was recently
featured in an Associated Press story September 19, 2008. The title
was, ``Interior Chief Vows To Stop Ethics Storm.''
According to the AP wire story by Dina Cappiello, from 2002 to 2006
energy companies leasing oil and gas on Federal lands through the
Department of Interior's Denver Office, which ``is responsible for
marketing billions of dollars worth of oil and natural gas that energy
companies barter to the government in lieu of cash royalty payments for
drilling, nine of the government employees received thousands of
dollars in gifts including meals, ski and golf trips and snow boarding
lessons. Two workers accepted gifts on 135 occasions.''
``After the Civil War, in 1866, a new placer mining law was
proposed with a 5% royalty. It was found that royalties imposed on
mines captured and leased by the Union Army during the Civil War were
stripped of high-grade ore and abandoned before lower grade minerals
could be extracted.'' said Fife.
``This is the same scenario S 796 will create, leaving millions of
tons of lower-grade minerals in the ground. Due to the poor track
record of the previous royalty system, Congress passed the 1866 mining
law without a royalty provision. The 1866 law was modified in 1870 and
1872 without the royalty provision, and has been modified more than 20
times since. Each of these modifications has been without a royalty
provision.'' Fife continued.
``Contrary to the belief of environmentalists and others, a mining
claim is not a mine. It only gives citizens the right to look for an
economic mineral discovery. Even just ``looking'' now requires
``holding or rental fees,'' extensive and expensive bonding and is
subject to nearly endless environmental regulations.'' said Fife.
``Former Attorney General Janet Reno in an official AG Opinion to
former Senator Bennett Johnson, then Chairman of the Senate Energy and
Natural Resources Committee, declared the ``rental or holding fee''
illegal. The Supreme Court has ruled that a mining claim with a
discovery is the same as private property with an unperfected title
until the mineral patent is granted.
``Once an economic mineral discovery meets the ``prudent man rule''
that is, a prudent citizen will expend his time, effort, and capital
with the reasonable expectation of development of a valuable mine, only
then does the citizen have ``discovery'' under the General Mining
Law.'' Fife continued.
``Most mom and pop prospectors can't qualify for a ``bond,'' so
they must come up with cash for a Certificate of Deposit as financial
assurance for reclamation. That is a huge and often too large a hurdle
for many mom and pop prospectors.
The National Association of Mining Districts represents mainly
small ``mom and pop'' prospectors who still find most of the new
discoveries despite all the new satellite and other technologies.
``Most discoveries, around 90%, are still found by mom and pop
miners,'' said Fife.
``The General Mining Law is part of the American Dream. During the
California gold rush people saw in action the revolutionary idea that
an individual could search for gold and with his own labor, discover a
valuable mine and actually own it.
``This was confirmation of America as land of the free. Before this
new American free enterprise way, the King and/or the State owned the
minerals. Individuals had to pay a ``royalty'' to government, if they
were lucky enough to receive permission from the King to prospect.''
``This may be the last of the truly free enterprise laws on the
books,'' said Fife.
Some proponents of S 796, the ``Ghost Town Act'' claim that the
land has been prospected for more than 150 years and everything has
been found. This compares to the head of the US Patent Office in the
1890's when he proposed closing the office, ``because everything
worthwhile had been invented.''
According to Vincent McKelvey, (Former Director of the US
Geological Survey, 1976 to 1978): ``Appraising mineral resources is an
emerging science. A final once and for all inventory of any mineral
resource is nonsense. Mineral reserves and resources are dynamic
quantities and must constantly be appraised. As known deposits are
exhausted, unknown deposits are discovered, new extractive technologies
and new uses are developed and new geologic knowledge indicates new
areas and new environments are favorable for mineral exploration.''
``As an example, the space age element Gallium, when combined with
Arsenic, creates a Gallium-Arsenide solar cell that increases the
production of electricity by 15% to 20% over Silicon solar cells. This
new technology recently won the trans-Australian Solar Car Race for the
Hughes Corporation,'' said Fife.
``Gallium-Arsenide computer chips can reportedly replace silicon
chips, by increasing the speed of computers theoretically by more than
ten fold. This could make the difference between winning and losing
thermo-nuclear war,'' said Fife.
In the search for uranium in the 1950's, it took thousands of mom
and pop explorationists were urged to find these rare anomalies of
nature that would supply the future demand for this and other strategic
elements.
In the late 1940's explorationists, looking for uranium on the
California Nevada border in a place that had been mined for gold and
silver numerous times over 200 years since the Spanish in the 1700's,
found Rare Earths.
``This discovery led to color television, efficient lighting and a
great saving of energy and jet fuel by reducing the weight of electric
motors in half and providing many other benefits to society. The only
other source of Rare Earths is in China. The supporters of S 796 would
have considered this area mined out and of no use to society. This
ignores the constant upgrades in technology that make minerals really a
renewable resource because it is possible to keep going back to mineral
sites and finding economic discoveries.'' Fife concluded.
ALRA Mining Director: Don Fife (714) 356-7200 Fax (714) 356-7200
[email protected]
The U.S. Senate Energy and Natural Resources Committee is chaired
by Senator Jeff Bingaman (D-NM). Reportedly, Senator Harry Reid (D-NV),
Senate Majority Leader, from the small mining town of Searchlight,
Nevada, has serious reservations about the negative impact on jobs and
the economy if S 796 should become law. Please, Senator, if you have
any doubts concerning this testimony, contact Mr. Don Fife and ask your
questions.
______

Statement of Belinda L. Hersh, Sweet, ID
My husband and I are one of those little ``mom and pop'' operations
that would be severly affected if this law is approved in committee and
taken on to the senate. Please don't do this. There is no need and it
feels like we are fighting the government all the time as it is. We are
over regulated, over governed and frankly it wears us out and all we
want to do is make a living and survive. Just because people are
elected to the government, doesn't mean they HAVE to make laws. It just
means you are there to protect folks like us. Quit making it harder for
us to live.
______

Statement of Brady Robinson, Outdoor Alliance
Chairman Bingaman and Committee Members:
My name is Brady Robinson and I live in Boulder, Colorado where I
serve as the Executive Director for the Access Fund, a national
climbing and mountaineering advocacy group dedicated to maintaining
recreational access and conserving the climbing environment.
I provide this testimony for the legislative hearing on the
Hardrock Mining and Reclamation Act of 2009 (S. 796) on behalf of the
Outdoor Alliance, a coalition of six national, member-based
organizations devoted to conservation and stewardship of our nation's
public lands and waters through responsible human-powered outdoor
recreation. Outdoor Alliance includes: Access Fund, American Canoe
Association, American Hiking Society American Whitewater, International
Mountain Bicycling Association, and Winter Wildlands Alliance.
Collectively, we have members in all fifty states and a network of
almost 1,400 local clubs and advocacy groups across the nation,
including hundreds of clubs and local advocacy groups in states with
significant current and historical mining activity.
The intersection between mining activity and human-powered outdoor
recreation pursuits is significant. Indeed, many western epicenters for
human-powered outdoor recreation, such as Bandelier National Monument
and Questa Dome in the Sangre de Cristo National Forest, in New Mexico,
Mt. St. Helens in Washington, the Rogue River in Oregon, and Yosemite
National Park and the Lake Tahoe Area in California and Nevada, happen
to be the same places where there are dramatic increases in new mining
claims or potential for new mines.
Although hardrock mining is an important part of our nation's
history and of many Western economies, it need not take place
everywhere that ore can be found. This is especially the case with
certain types of federal public lands that are valued for their
landscapes, ecosystems, and the opportunities they provide for
enjoyment for all Americans. Furthermore, we believe that in addition
to the natural and social values embodied by America's unique public
lands, the economic benefits of outdoor recreation in the West should
also be protected from past and future mining practices.
From our perspective, hardrock mining reform should focus primarily
on three fundamental areas: (1) creating a fair royalty system to fund
abandoned mine cleanup; (2) environmental protection standards that
explicitly recognize the value of our public lands beyond what can be
extracted by mining interests; and (3) protecting federal lands that
have exceptional non-extractive value, such as National Conservation
Areas, Wild and Scenic River corridors and Inventoried Roadless Areas
from future mining activity.
i. create a fair royalty system to fund abandoned mine cleanup
The human-powered outdoor recreation community is intimately
familiar with the ecological legacy of our federal hardrock mining
policy because climbers, hikers, boaters, skiers and mountain bikers
witness its effects on the ground. As such, the Outdoor Alliance has a
strong interest in cleaning up the 500,000 abandoned mines across the
West through new legislation that puts in place effective environmental
safe guards to prevent future similar problems. Abandoned mines are
more than a visual blight on the landscape: significant pollution and
safety concerns also result from abandoned mines all across the West.
There is an enormous financial cost associated with past and
current mining practices because most of these abandoned mines are now
essentially the responsibility of the American taxpayers. Mining
activities in the United States have resulted in upwards of 500,000
abandoned mines on Bureau of Land Management lands, 25,000 to 35,000
abandoned mines on Forest Service lands, and more than 2,000 in the
National Park System. Estimated cleanup costs for abandoned hardrock
mines in the United States could exceed $50 billion.\1\ Furthermore,
according to the Environmental Protection Agency, mining has already
contaminated the headwaters of more than 40 percent of the watersheds
in the West.\2\
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\1\ United States Environmental Protection Agency, Office of Solid
Waste and Emergency Response, Cleaning Up the Nation's Waste Sites:
markets and Technology Trends, September 2004.
\2\ United States Environmental Protection Agency, Liquid Assets:
America's Water Resources at a Turning Point, 2000.
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Despite the intimidating scope and cost of cleaning up abandoned
mines, hardrock mining operations pay no royalties on the gold, copper,
silver and uranium extracted from public lands. The Outdoor Alliance
therefore believes that a fair and workable royalty system is required
to fund long-overdue efforts to reclaim hundreds of thousands of
abandoned mines across the West that continue to contaminate our public
lands and waters. We are delighted that S. 796 endeavors to pursue this
goal by creating a royalty system to fund abandon mine clean-up.
ii. environmental protection standards
For the last 137 years, hardrock mining activities on federal land
have enjoyed preferential treatment. Under the current law, mining is
generally seen as the ``best use'' of federal lands. Although hardrock
mining is subject to a number of federal and state environmental
protection statutes, hardrock mining also benefits from a number of
exceptions to these laws. From our perspective, S. 796 goes a long way
in improving this situation. For example:

Section 301 (d) requires that the permit process for mining
activity be coordinated ``To the maximum extent practicable''
with the National Environmental Policy Act of 1969 (NEPA);
Under Section 303(b), permits applications must take into
account pre-mining land and water resources and develop an
operations plan that both avoids the formation of acid mine
drainage to the maximum extent practicable and employs best
management practices;
The notice and comment provisions in Section 303(c) relating
to permit issuance decisions will also have an indirect, but
material impact on the environmental aspects of future mining
activity; and
Under the Section 306 the bill includes provisions that
direct the Secretary of Agriculture to ``take any action
necessary to prevent unnecessary or undue degradation of the
lands.''

These provisions, and a number of others, are a serious improvement
over the status quo and would help modernize our nation's hardrock
mining policy. We believe, however, that there is some room for modest
improvement. First, we think that a comprehensive statement directing
the Secretaries of Interior and Agriculture to assure that mining
activities be conducted in a manner that is protective of the
environment, and also be placed in the context of other uses and values
of federal land, including habitat, clean air and water and sustainable
recreation is necessary to place hardrock mining activity in
perspective with 21st century conservation and stewardship values.
Second, we believe that the ``Administration of Land'' provisions in
Section 306(c) cover not only the Secretary of Agriculture, but the
Interior Secretary as well.
iv. protection of special places
Our nation's unique public lands provide critical wildlife habitat,
clean water supplies, and unmatched human-powered recreation
opportunities. These irreplaceable and vulnerable areas generally are
not appropriate places for mining and should be protected from new
mining claims.
We recognize that metal plays a significant role in much of the
outdoor equipment that we use to explore public lands. However, given
the massive ecological footprint of modern mining, the human-powered
outdoor recreation community believes that some special and unique
public lands and waters should be categorically withdrawn from future
mining development. This can be accomplished by protecting (subject to
existing rights) lands recommended for wilderness designation,
wilderness study areas, national monuments, wild and scenic rivers (and
those determined eligible and under study for inclusion in the system),
as well as inventoried roadless areas.
As we understand it, rather than a categorical withdrawal of all
such land, S. 796 directs the Secretaries of Agriculture and Interior
to work with local land managers to review these and other categories
of federal lands with high ecological values to identify parcels that
should be withdrawn from future mining activity. This review must be
completed within three years of enactment of S. 796. The implication
appears to be that any land in these categories not identified to be
withdrawn from mining within this three year window would then be open
to mining henceforth. While an improvement over the status quo, this
approach does not appear to be adequate considering the millions of
acres of public land at stake. Outdoor Alliance favors withdrawing all
of these categories of high ecological value Federal land from mining
at the outset.
To the extent categorical withdrawal of high ecological value
Federal land high-value ecological is not an option, we encourage the
Committee to consider inverting the proposed withdrawal mechanism in a
manner that would vest mining interests with the responsibility of
analyzing mineral potential in these federal land categories subject to
a discrete time period to petition the respective Secretaries to open
limited parcels to mining activity. Whatever lands in these federal
categories not opened by the respective Secretaries would, of course,
be closed to mining activity henceforth. Some type of public notice and
comment would further enhance this process.
v. conclusion
The human-powered community places a greater value on public lands
beyond our own use and enjoyment of these special areas. That is why we
work with federal land managers to design rules and policies that
conserve and protect public lands and create and follow our own
internal environmental protection standards-from clean climbing to the
``Leave No Trace'' ethics-that ensure our activities coexist with other
uses and limit our impacts on the environment. Requiring the mining
community to similarly put their use of public lands into the greater
context of the public interest is only fair, and long overdue.
Accordingly, we support the provisions in S. 796, subject to the modest
policy suggestions discussed herein, that aim fund abandoned mine
cleanup, elevate environmental protection standards, and make off-
limits to mining the many high-value natural and recreation sites on
public lands.
Thank you for the opportunity to provide written testimony on this
important legislative initiative.
______

Statement of Jon J. Indall, Counsel, Uranium Producers of America,
Santa Fe, NM
The Uranium Producers of America (``UPA'') was founded in 1985 to
promote the viability of the domestic uranium industry. Current members
include Energy Metals Corp., Power Tech Uranium Corp., UR-Energy USA,
Inc., Cameco Resources, Denison Mines Corp., Laramide Resources Ltd.,
Mestena Uranium LLC, Power Resources, Inc., Strathmore Minerals Corp.,
Uranium Resources Inc., and Neutron Energy, Inc. UPA member companies
are actively pursuing exploration, development and production of
domestic uranium resources in Wyoming, Colorado, Texas, South Dakota,
Arizona, Nebraska, Utah and New Mexico. We appreciate the opportunity
to provide a statement concerning S. 796 and S. 140. The UPA strongly
urges that any changes to the existing Mining Act be made only after
careful consideration of the adverse impacts such changes could have on
our nation's ability to become more energy independent. The United
States currently imports approximately 90% of the uranium used to power
the nation's one hundred and four nuclear power reactors. This fact
alone should cause energy policymakers concern and requires that no
additional impediments to increase domestic uranium production be put
in place. UPA's position is that domestic uranium production is vital
to the national security and energy independence of the United States
and, if given a fair chance, will, once again, play a key and
sustaining role in the front end of the nuclear fuel cycle.
i. good energy policy demands that domestic uranium production
be encouraged
The role of nuclear power as a major emission free energy source
was much discussed in this Committee's recent hearings on climate
change and a national energy policy. The confluence of high oil prices
and the need to reduce greenhouse gas emissions has justifiably
promoted the interest in the development of renewable and alternative
forms of energy. Nuclear power provides emissions-free, stable, base-
load power to electricity users. The 104 operating nuclear power plants
in this country produce 20% of our electric power and approximately 75%
of our carbon free electricity. These reactors resulted in the
avoidance of almost 700 metric tons of carbon emissions in 2007. This
is more than Canada emits on an annual basis or twice the amount
emitted by privately-owned vehicles in the U.S. on an annual basis.
Emission free nuclear power provides a constant, reliable baseload
source of energy that is required to grow our economy.\1\
---------------------------------------------------------------------------
\1\ See Murkowski Speaks on the Need for Nuclear Energy, Press
Release June 2, 2009.
---------------------------------------------------------------------------
As policymakers are recognizing the vital role that nuclear energy
must play to meet our nation's electricity demands in an inexpensive,
clean manner. UPA believes the following facts must be considered as
the United States embraces the role that uranium must play to ensure
our country's secure energy future:

The United States currently imports over 90% of the uranium
it needs for the present nuclear power fleet.
The United States has significant domestic uranium reserves.
Today's higher prices have enabled new companies to enter into
exploration and will, in turn, stimulate competition as they
work to provide U.S. utilities with greater variety of secure
domestic supply for their nuclear fuel. Previous exploration in
New Mexico alone has been established by geologists at over 600
million pounds of unmined uranium resources, much of this on
public lands, and it is certain that future exploration and
mining will expand on this number.\2\ The resources in other
public lands states are significant, and these resources can be
produced in an environmentally responsible manner following
today's existing standards and regulations for mining.
Extremely conservative estimates by the Energy Information
Administration in 2004 show uranium resources by state based on
$50 per pound prices to be:
---------------------------------------------------------------------------
\2\ See McLemore and Chenoweth, Uranium Resources in the San Juan
Basin, New mexico, New mexico Geologic Society, 2003.

Wyoming 363 million lbs.
New Mexico 341 million lbs.
Arizona, Colorado, Utah 123 million lbs.
Nebraska, South Dakota 40 million lbs.
Texas 23 million lbs.\3\\3\ U.S. Energy Information Agency, 2006.

UPA believes EIA estimates will be greatly exceeded as exploration
and development proceeds.

The renewed exploration of uranium has energized rural
communities in the western United States. These former mining
communities are welcoming the domestic uranium mining as they
anticipate many high-wage jobs and significant economic
development investments in their towns and counties, as well as
increased tax revenues to support infrastructure, educational
and social needs.\4\
---------------------------------------------------------------------------
\4\ See Resolution in Support of the 1872 Mining Law by he Cibola
County Commission and Resolutions Supporting New Uranium Mining by the
Cibola and McKinley County Commissions and Grants, New Mexico, City
Commission, attached as Exhibit 1.
---------------------------------------------------------------------------
Three countries produce 60 per cent of the uranium used in
current reactors. If projected new build reactors are
constructed and come on line, an additional 64,615 tons of
uranium production over current annual worldwide production of
41,195 tons of uranium will be required to meet their needs.\5\
---------------------------------------------------------------------------
\5\ World Nuclear Association 2008.
---------------------------------------------------------------------------
Our nation's energy demands must be fulfilled to keep our
economy growing. On May 8, 2006, the House Committee on
Government Reform produced findings on a committee study on
securing America's energy future. Finding 8 from this report
stated ``Injuclear energy must become the primary generator of
baseload electricity, thereby relieving the pressure on natural
gas prices and dramatically improving atmospheric
conditions.''\6\ This finding is based on the fact that
electricity generated from nuclear power is inexpensive and
clean.
---------------------------------------------------------------------------
\6\ Seeking America's Energy Future, Majority Staff Report to Comm.
on Government Reform, Chairman Tom Davis, and Subcommittee on Energy
and Resources, Chairman Harrell E. Issa, Comm. on Government Reform,
U.S. House of Rep., May 2006.
---------------------------------------------------------------------------
Against the world wide backdrop of a nuclear power renaissance,
policymakers must ask the question, is it good energy policy to
maintain an overwhelming reliance on foreign uranium? The answer is
obviously no. Congress has determined that importing 70% of oil is
terrible energy policy and our nation cannot afford the consequences of
maintaining its over reliance on foreign uranium. To do so would be
sheer folly and could set the state for repercussions such as those we
have experienced due to our over reliance on oil. However, S. 796 and
S. 140 make domestic uranium production more difficult if not
impossible on public lands.
ii. the mine act reform proposed in s. 746 and s. 140 will prevent new
uranium mines on public lands at a time when congress should be working
to encourage jobs to reinvigorate the economy
At a time when Congress should be looking to the mining industry to
promote employment and tax revenues, it makes no sense to make mining
on public lands more restrictive. That is what the proposed ``reforms''
contained in S.796 and S. 140 would accomplish. These bills decimate
the security of land tenure, create a burdensome permitting process and
place vague and uncertain loyalty provisions into law. All of these
proposals will make the ability to acquire the necessary investment to
develop and permit new uranium mines impossible. Other provisions
contained in these proposals simply pile on layers of bureaucracy and
impediments that would make anyone seeking to develop a mine on public
lands certifiably insane. The UPA supports the positions taken by the
National Mining Association and Northwest Mining Association against
these legislative efforts. These associations have provided thoughtful,
reasoned responses to the proposed legislation that would curtail most,
if not all, mining on federal lands if enacted in their current forms.
If the Committee's intent is to stop mining on public lands, it
should so state. Instead of unreasonably raising the bar on those
attempting to provide our country with a stable supply of vital energy
resources, the Committee should seek reasonable reform that does not
price companies out of mining on public lands or simply delay the
permitting process beyond the ability of reasonable investment backed
expectations. At a time when the nation's economy cries out for more
jobs, these proposals seem to tell miners, suppliers and others that
make their living directly or indirectly from these operations that the
Committee is not interested in the good, high paying jobs created by
every mining operation. President Obama has recognized the impact ill-
advised Mine Act Reform would have on current and future jobs. ``I
would not pass legislation that would unduly hinder the industry or
cause job loss in rural Nevada or other mining areas.''\7\ As stated by
Senator Harry Reid, ``[n]othing should rank higher among our priorities
today than protecting the jobs we have throughout Nevada and
encouraging the creation of new ones.\8\ This is true for other states
that have new uranium operations poised to deliver the fuel needed for
nuclear power and jobs so desperately needed in these areas.
---------------------------------------------------------------------------
\7\ ``Not All in Mining Industry Favor McCain,'' Elko Daily Free
Press, October 10, 2008.
\8\ ``Sen. Harry Reid: Making Mining Law Reform Work for Nevada,''
Special to the Nevada Appeal, July 29, 2009.
---------------------------------------------------------------------------
A summary of a study done in 2008 for proposed uranium mining jobs
by the Arrowhead Center of New Mexico State University is attached as
Exhibit 1 and shows that approximately 3,200 direct and 5,000 indirect
and induced jobs can be created in New Mexico alone, if planned
projects can proceed.\9\ All public land mining projects in New Mexico
must undergo an Environmental Impact Statement and meet the closure and
bonding requirements of the New Mexico Mining Act. This process takes
at least two to three years in order to get the baseline data required
for any uranium project. Undertaking a new uranium project takes
patience, tenacity and significant investment. The proposals found in
S. 796 and S. 140 raise significant impediments to an already difficult
task.
---------------------------------------------------------------------------
\9\ See James Peach and Anthony Popp Summary of ``Economic Impacts
of Planned Uranium Mining and Milling Operations in New Mexico,''
Arrowhead Center, Inc., August 1, 2008, attached as Exhibit 2.
---------------------------------------------------------------------------
iii. uranium should remain as a leaseable mineral.
Although uranium is used to create energy, it is not like coal oil
and natural gas and should be kept as a locatable mineral. Coal, oil
and natural gas are fuel minerals that are typically located in vast
sedimentary basins such as the Powder River Basin, San Juan Basin,
Permian Basin, or the mid-continental US and Appalachians. Once an oil
or natural gas well is successfully completed, it can produce with
little or no additional effort other than insuring the well is in
operating condition and functioning.
Uranium deposits are small and difficult to locate and define.
Extensive exploration drilling, usually several hundred exploration
holes, is required to delineate the ore body. Uranium ore bodies are
not found in blocks like coal reserves, but are sinewy and broken up
underground. Uranium deposits are also found at depths in excess of
3,000 feet below the surface. Uranium deposits are often found in roll
fronts that are long, linear, discontinuous, narrow ore deposits. These
are very common in New Mexico, Texas, Wyoming and Nebraska. Such
orebodies are difficult to locate and must often be drilled out on 25-
50 foot centers. These require a reductant such as a humate substance
to cause the uranium to drop out of the fluids to form the ore deposit.
Such deposits are unlike any coal, oil or natural gas deposits.
Finally, uranium deposits differ from coal, oil and gas because factors
such as ore grade, depth, metallurgical problems and additional
geological constraints have great impact on the economics of mining a
uranium deposit. Uranium deposits are much more like other hard rock
minerals than coal, oil or gas reserves.
The discovery, delineation and development of an in-situ or
conventionally recoverable uranium ore deposit involves the same
activities as those required for development of copper, cobalt, zinc,
gold or other hard rock mineral deposits. Such activities require years
of fact-finding including grounds, aerial and satellite reconnaissance;
extensive exploration drilling; core exploration drilling;
environmental baseline data gathering; metallurgical testing; workforce
hiring and training; mine and mill planning, design and construction;
reclamation planning and decommissioning. Any uranium mine on public
lands requires an Environmental Impact Statement which is not required
for oil and gas operations. Once uranium ore is removed from the
ground, it requires additional extensive and expensive processing in
the form of mining, crushing of the ore, separation and concentration
of the U308. Further off-site steps include conversion, enrichment, and
fuel fabrication. The in-situ process, while somewhat less expensive,
still requires discovery and delineation of an economic orebody, mine
planning and construction, recovery, separation and concentration, and
all of the additional downstream steps of conversion, enrichment and
fuel fabrication. None of these expensive and time consuming steps are
required for coal, oil or natural gas.
The Department of Energy has conducted leasing of uranium
properties in Colorado. However, these properties have a major
distinction from other possible future uranium leases on public lands.
These properties were developed and delineated by the federal
government during the initial federal government procurement program.
If the federal government would develop and delineate future uranium
ore deposits on public lands, a stronger argument of making uranium a
leaseable mineral could be made. However, that will not be the case and
it will be the private company or individual that will take the risk
and expense to explore, discovery, delineate and permit uranium
deposits on public lands. The federal government takes no risk or cost
in the development of the vast majority of uranium properties needed to
power our nation's nuclear fleet to produce clean, inexpensive
electricity.
iv. uranium mining on federal lands should not be singled out for
additional study
Section 505 of S. 796 would require the Secretary of the Interior
to conduct a study of uranium development on federal lands. Part of
this study would be to consider whether uranium should be a leaseable
mineral rather than a locatable mineral. For the reasons set forth in
Point III of UPA's statement, uranium should remain as a locatable
mineral. The remaining purposes for the proposed study is to analyze
the laws and agencies that already govern the development of uranium on
federal lands. UPA members submit that this study has no merit, is
unnecessary and simply creates more delays and impediments against the
overriding need for new domestic uranium mining.
One of the issues proposed to be studied is whether adequate
financial surety or bonding exists under current law. The Nuclear
Regulatory Commission, which just completed a Generic Environmental
Impact Statement for new in situ recovery uranium projects, requires
sufficient bonding to assure groundwater restoration and other
decommissioning activities based upon industry-wide practices.\10\ In
New Mexico, a conventional uranium mining project on federal, state, or
private lands is subject to bonding under the New Mexico Mining Act
which requires fmancial assurance that the mine site be reclaimed to
achieve a self-sustaining ecosystem.\11\ Federal agencies also have
bonding requirements, and it is clear that uranium mines, like other
hard rock mineral mines, have sufficient bonding safeguards to assure
sufficient site reclamation.
---------------------------------------------------------------------------
\10\ 10 C.F.R. Part 40, Appendix A, Criterion 9.
\11\ NMSA 1978, Sec. Sec. 69-36-1, et seq. and Title 19, Chapter
10, Parts 1, 4 and 6, New Mexico Administrative Code.
---------------------------------------------------------------------------
The Nuclear Regulatory Commission (``NRC'') and Environmental
Protection Agency (``EPA'') regulate in situ recovery through
regulations found in 40 C.F.R. Part 40, Appendix A and 40 C.F.R. Part
192, respectively. These regulations have been continuously updated to
implement new standards as the industry and its regulators come to
better understandings of the impacts of uranium recovery. Standards and
protection levels for air emission and ground water protection have
increased dramatically since uranium mining began in the 1950's. The
United States needs a secure source of uranium production. This
activity can be accomplished in a manner to protect the public, the
workers and the environment. Additional study is not necessary.
v. conclusion
In the 1950's, the Congress created the Atomic Energy Commission
(``AEC'') to assure that the country could produce enough uranium to
supply our nuclear weapon needs. The AEC charged private industry to
create the uranium producing industry, noting ``that the mining
industry would be the backbone of this vigorous program aimed at
augmenting the uranium supply of the U.S.A.''\12\ The United States
went from virtually no uranium production to an over abundance of this
vital element under the AEC Procurement Program. The Procurement
Program provided incentives to private industry to start a domestic
uranium industry from scratch, including a market for the product.\13\
Recognizing the importance of the domestic uranium industry in the
nuclear fuel cycle and the nation's national security and energy
independence, Congress was concerned that the country maintain the
vigorous domestic uranium industry the AEC had created.\14\ Today, the
United States is at a similar crossroads. It is a given that nuclear
power is a vital component to the baseload production of clean,
inexpensive electricity. Some would argue that it is the best source to
fulfill this need. We import almost all of the uranium necessary to
fuel our nation's nuclear reactors. The question before the Committee
is whether to adopt the proposed legislation that's effect will be to
commit the United States to a continued over reliance on foreign
uranium and to deprive thousands of citizens from the good, high paying
jobs that would be created by domestic uranium operations or to
negotiate reasonable Mine Act Reform and not single out uranium from
other locatable minerals.
---------------------------------------------------------------------------
\12\ Holger Albrethsen, Jr. and Frank E. McGinley, Summary History
of Domestic Uranium Procurement Under U.S. Atomic Energy Commission
Contracts--Final Report, U.S. Dept. of Energy, Oct. 1982.
\13\ Sheldon P. Wimpfen, Manager, Grand Junction Operations Office,
U.S. Atomic Energy Comm'n, Address to Colo. Mining Ass'n (Denver, CO,
February 13, 1953.
\14\ S. (Joint Committee) Rep. 88-1325, 88th Cong., 2d Sess., 1964
U.S.C.C.A.N. 3121 (``the measures taken in this bill to assure the
viability of the domestic uranium industry are in the national interest
since this industry is closely related to our vital defense and
security interests'') & 3135 (``the maintenance of a viable domestic
industry is an integral part of a sound nuclear industry and may,
indeed, be closely intertwined with the defense and security interests
of the United States''); 110 Cong. Rec. 20,145 (1964) (remarks by
Congressmen Aspinall & Morris).

[Attachments have been retained in committee files.]
______

Statement of Thomas F. Cofsky, Vice President, Manufacturing and
Logistics, Oil-Dri, Chicago, IL
I am writing to express our opposition to the Hardrock Mining and
Reclamation Act of 2009. It may be time for mining law refomt, but we
must not pass this bill if we wish to keep well-paying mining and
manufacturing jobs in this country. Bad legislation such as this is not
mining law reform!
Particularly objectionable is the imposition of a four to eight
percent royalty on gross revenues (rather than profits). Without
deductions for the cost of mining, processing or refining, incentives
to mineral development are removed and maximum mineral resources
recovery is discouraged.
Of concern, also, is the loss of the ability to patent mineral
discoveries as well as the loss of existing patented discoveries.
Companies such as ours expend time and money in locating, proving and
retaining reserves for future development and use. We need the ability
to develop and hold patents to maintain viable sources of raw materials
and thus keep mining and manufacturing jobs in rural locations where
good jobs are scarce. The ability to prove the presence of ``locatable
minerals'' that provide specific benefits is basic to the ability to
develop a new mine and important to assure future raw materials
supplies to existing businesses. Further more, the retroactive
elimination of patents issued breaches trust between the issuer (our
government) and the individuals and businesses that have expended
considerable money and time to obtain them and raises significant
constitutional issues.
It is also important that the staking of mill sites remains a
viable use of public land. Under current mining law, mill sites can be
staked to locate processing facilities near to, but not on top of, the
mineral claims. Elimination of this feature increases the chances that
processing facilities will end up on top of valuable minerals.
Finally, mining and manufacturing have been and are currently being
regulated at all levels of government. The addition of another,
duplicative regulatory framework that conflicts with existing programs
across the country (such as those administered by the Bureau of Land
Management, the United States Forest Service and the individual state
and local governments) is onerous and unnecessary. In our global
economy, it is crucial that capital investments for successful mineral
development go to countries that offer stable public policy climates.
In fact, the World Bank has advised nations that to attract (and keep)
necessary investment in viable mining and manufacturing industries,
governments must adopt the fundamental principle of ``no surprises'' in
the enactment and administration of laws and policies.
Oil-Dri Corporation of America has been a responsible miner and
manufacturer of mined products for nearly 70 years. We currently employ
workers or have mining operations in Illinois, Georgia, Mississippi,
California and Nevada. We need your support so that we can continue to
run our business. Please support our entrepreneurs, businesses and
miners! Please voice opposition to 5.796--The Ilardrock Milling and
Reclamation Act of 2009.
______

Statement of Alan Bernholtz, Mayor, Town of Crested Butte,
Crested Butte, CO
This correspondence is provided in connection with the Committee's
hearing relative to S. 796. We would appreciate it if the Committee
would enter this correspondence into the hearing record as the issues
you will be addressing with the Senate bill are of vital importance to
the Crested Butte community.
background
Citizens of Crested Butte and Gunnison County, Colorado believe
that a pending proposal to engage in molybdenum mining operations on
Mt. Emmons located just west of Crested Butte's municipal boundaries
and within the Town's municipal watershed threatens their way of life.
The planned mining operations will be situated primarily on federal
lands. There is a very legitimate concern that these mining operations
will (i) pollute the Town's watershed and, in turn, contaminate the
community's drinking water, and (ii) destroy the local economy that for
the past 35 years has been based on tourism and recreational
opportunities due to the area's scenic beauty and pristine environment.
Action is needed to preserve this community. Much of the problem stems
from the fact that mining operations on federal lands are currently
governed by the outdated General Mining Law of 1872 (the ``Minim',
Law'') that no longer serves the nation's interests.
Crested Butte is a world-class ski town and National Historic
District with a resident population of approximately 1,500 persons. The
community was once a small coal mining community. Gunnison County and
the Town have however, over the course of the last 35 years, converted
themselves almost entirely into a tourist-based economy, with a strong
agricultural component. Skiing, fishing, hiking, kayaking, rafting and
mountain-biking are the life-blood of the economy. To be sure, the
clean environment, recreational opportunities and access to abundant
public lands allow the community to thrive.
In 2007, U.S. Energy Corp. of Riverton, Wyoming, announced that it
would begin developing a molybdenum mine project on Mt. Emmons. The
proposal, while not fully developed, is likely to include the
development of extensive under and above ground mine workings, numerous
milling facilities (possibly including one within a few thousand feet
of Crested Butte's drinking water reservoir), at least two large water
reservoirs, one or more substantial tailings dumps and a system of
pipelines, roads, lighting and other associated industrial mining
infrastructure. The proposed project would most likely consist of a
6,000 to 10,000 ton per day mining operation. The operation would use
parts of nearly 6,000 acres of patented (365 acres) and unpatentcd
(5,600 acres) mining claims located on federal land. It would cover
more than eight square miles. A map illustrating a possible version of
the proposed project and a map delineating the Town's municipal
watershed is included herewith for your reference.*
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* Maps have been retained in committee files.
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In 2008, Thompson Creek Metals Company, Inc. announced that its
subsidiary, Thompson Creek Metals Company USA, had signed an Option
Agreement with U.S. Energy that gives Thompson Creek the right to
acquire up to 75% of the Mt. Emmons molybdenum project. Under that
agreement, Thompson Creek will act as the project manager and will
handle the assessment, environmental permitting, exploration and
development of the property.
The community's concerns are three-fold. Operation of a molybdenum
mine in this proposed location would: (1) irreversibly destroy hundreds
of acres within Crested Butte's municipal watershed by including one or
more mill sites within this area (this could lead to contamination of
the Town's drinking water and threaten the downstream agricultural and
ranching communities that also rely on water from this drainage); (2)
damage thousands of acres of prime wildlife habitat and destroy the
pristine nature of the area with its large-scale industrial activities,
dust, increased traffic, noise and lighting; and (3) significantly harm
the local economy, by lessening or eliminating ``amenities'' (i.e.,
magnificent views, clean air, clean water and immediate access to the
outdoors and nature) that are critically important to attracting
tourism.
In order to adequately protect Crested Butte, the community urges
necessary and comprehensive reform to the Mining Law.
withdrawal of public lands
At the outset, the community respectfully requests Congress to
immediately withdraw, subject to valid existing rights, the lands on
and surrounding Mt. Emmons located within Crested Butte's municipal
watershed from mineral entry under the Mining Law. Such action will
help ensure that the community can depend on a healthy watershed and a
sound long-term tourism and agricultural-based economy.
the mining law and s. 796
A. Authority to Deny a Mining Permit
To encourage mining the existing Mining Law generally opens federal
lands to mining operations so long as mining companies agree to operate
in a manner that will -minimize adverse impacts'' to the environment
and provide sufficient financial security to address reclamation once
mining operations cease. The U.S. Forest Service (the -Forest
Service'') may require a mining company to modify its proposed -Plan of
Operations'' (i.e., the mining permit) to accommodate certain concerns;
but, essentially, and of critical import, the Forest Service does not
believe that it has the authority to deny the mining company the right
to conduct its mining operations.
This situation is in sharp contrast to other activities that occur
on federal lands. Authorized by later-enacted statutes, the federal
government has full discretion to allow or deny, for example, ranchers
the right to use federal lands as grazing lands for their herds or to
grant oil and gas companies the right to engage in exploration and
production of hydrocarbons on federal lands.
The Mining Law must be updated and made consistent with these other
laws so that the determinations about appropriate activities permitted
on federal lands are made based on the public interest, not the
interests of private mining companies.
1. H.R. 699--The Hardrock Mining and Reclamation Act of
2009
Section 301 of H.R. 699 grants the Secretary of the Interior for
Bureau of Land Management (BI,M) lands, or the Secretary of Agriculture
for Forest Service lands, the right to deny permission to engage in
mining operations if the applicable Secretary determines that ``undue
degradation'' would result from such activities. -Undue degradation''
in the House bill is defined as irreparable harm to significant
scientific, cultural or environmental resources on public lands that
cannot be effectively mitigated. Crested Butte strongly supports these
provisions.
2. S. 796
Section 303 of the Senate bill also grants the Secretaries the
right to deny permission to engage in mining activities on federal
lands; however, denial is only allowed if the applicable Secretary
determines that mining permit does not meet the requirements of (a) the
Mining Law (as amended by the Act). (b) the regulations implementing
the Mining Law (as amended by the Act), or (c) other applicable laws.
So, although the Senate bill allows the agencies to disapprove mining
proposals that cause ``unnecessary or undue degradation,'' that term is
never defined. This is a significant flaw with S. 796.
Under the current regulatory definition and interpretation of
``unnecessary or undue degradation,'' the BLM takes the position that
``unnecessary or undue degradation'' is not an independent standard and
is only found when the proposed operation would violate some other
environmental law. Thus, the Senate bill essentially provides no
meaningful standard by which the Secretary can judge a permit
application, except perhaps if the proposed mining operations would
violate another statute such as the Clean Water Act. The Senate bill
does not substantively change the current review process, outside of
requiring the undefined ``unnecessary or undue degradation''
requirement to apply to the Forest Service in addition to the BLM.
Crested Butte submits that these changes are inadequate and do not
protect the public interest. Any mining reform legislation must adopt
the House bill language on mining permits, allowing the applicable
Secretary to deny a permit if the subject mining operation would result
in ``undue degradation.'' To ensure that the standard is meaningful,
the definition of ``undue degradation'' provided in the House bill must
he adopted.
B. Withdrawal of Federal Lands
The mining industry is very concerned that the Secretary could
determine, at the conclusion of the permitting process, that a permit
is not warranted after a mining company has expended years and great
sums of money trying to meet all aspects of the mining statute and to
develop its Plan of Operations in a manner consistent with the
requirements of the Forest Service. Therefore, it seems practical to
establish an amended withdrawal provision that would require the
Secretary, based on a petition from the state, local community or
Indian Tribe, to withdraw certain federal lands from the operation of
the Mining Law, subject to valid existing rights, at the commencement
of the permitting process.
1. H.R. 699
Section 202 of the House bill would allow any State, political
subdivision or an Indian Tribe to petition the applicable Secretary for
the withdrawal of a specific tract of federal land in order to protect
specific ``values'' important to the community. ``Values'' may include
a watershed to supply drinking water, wildlife habitat, cultural or
historic resources or scenic vistas of the area. In addition, the
Secretary would have to grant the petition, subject to valid existing
rights, unless the Secretary finds a compelling reason to deny the
request because it is ``against the national interest.''
2. S. 796
Section 307 of the Senate bill also allows withdrawal; however,
that action must meet the criteria of the Federal Land Policy
Management Act of 1976 provision addressing the development and
revision of federal land use plans. The criteria set forth in that
provision includes encouraging the Secretary to make federal land use
plans consistent with state and local plans, so long as they are
consistent with federal law. Unlike the House bill, the Senate bill, as
is the case under current law, provides that the Secretary's withdrawal
decision is entirely discretionary. There are no effective standards
that the Secretary is required to meet when considering withdrawal.
Crested Butte submits that these changes are inadequate and do not
protect the public interest. Any mining reform legislation must adopt
the withdrawal provisions of the House bill so that the Secretary must
properly consider and balance benefits from future mining operations,
values important to the state and local communities (e.g., preservation
of a watershed) and the national interest when evaluating the potential
impact a mining operation will have on certain federal lands. If the
local community, state or Indian Tribe provides sufficient evidence of
an important public value in withdrawing the land, then absent a
counter and overriding national interest, the Secretary must issue the
withdrawal.
conclusion
Because the proposed molybdenum mine on Mt. Emmons could result in
significant degradation to the environment of the region (pollution of
the area's watershed and drinking water) and to the region's tourist
and recreational-based amenities-based economy, the federal lands
within the Crested Butte watershed area should be withdrawn, subject to
valid existing rights, from mineral entry under Mining Law.
It is extremely difficult, however, to obtain withdrawal under the
antiquated Mining Law because there is essentially a rebuttable
presumption that milling is the preferred use of federal lands. Due to
this presumption, Secretarial withdrawals are rare, even when the
withdrawal is requested by a broad consensus of local and state elected
officials.
Therefore, the Mining Law must be amended to make it consistent
with other more recently-adopted federal schemes that mandate broader
review, taking into account environmental and economic concerns, e.g.,
Surface Mining Coal and Reclamation Act of 1977 (SMCRA). In particular,
the final amended Milling Law must: (1) grant the Secretary authority
to deny a mining permit if the mining operation would result in undue
degradation as is provided in the House bill; and (2) direct the
Secretary to withdraw federal lands from mineral entry under the Mining
Law, subject to valid existing rights, to protect specific values
important to the subject community--again as stated in the House bill.
Adoption of these provisions will ensure a proper balance among the
interests of the mining industry, state and local communities and the
national interest.
Thank you, in advance, for the opportunity to submit the foregoing
comments for the record during your Committee hearing, The Crested
Butte community hopes that the Committee and the larger Senate will
take our concerns and comments discussed herein with the utmost sense
of urgency as communities like Crested Butte stand to lose everything
should the Senate fail to amend the Mining Law in a timely and
responsible manner.
______

Statement of Steven C. Borell, P.E., Executive Director, Alaska Miners
Association, Inc., Anchorage, AK
Thank you for the opportunity to comment on 5.796, Hardrock Mining
& Reclamation Act and 5.140, Abandoned Mine Land Reclamation Act. This
bill is of extreme importance to the Alaska Miners Association and its
members.
The Alaska Miners Association is a non-profit membership
organization established in 1939 to represent the mining industry in
Alaska. The AMA is composed of more than 1000 individual prospectors,
geologists and engineers, vendors, suction dredge miners, small family
mines, junior mining companies, and major mining companies. Our members
look for and produce gold, silver, platinum, diamonds, lead, zinc,
copper, coal, limestone, sand and gravel, crushed stone, armor rock,
and other materials. The future and livelihoods of many of our members
depend on the General Mining Law.
The Alaska Miners Association is very concerned about 5.796. We
believe that this legislation would effectively eliminate new mining
operations on the federal public lands. This legislation would add
unbearable royalty costs, unknown permitting costs, uncertainty of land
tenure, uncertainty for exploration, uncertainty for mining,
uncertainty for financial assurance, and uncertainty for enforcement.
The proposed gross royalty alone would force most existing mines to
close down. Others would be forced to begin high-grading their deposits
thereby leaving metal in the ground that could otherwise be mined. The
impact would be that mines would close much sooner than otherwise and
many thousands of workers would loose their jobs. A gross or ``Net
Smelter Return'' royalty is a parasitic cost that must be paid, even
when the mine is loosing money.
Mr. Phillips Baker testified at the 7/14/09 hearing on S.796. He
stated flatly that, if a gross royalty as proposed in this legislation
was applicable to the Greens Creek mine in Alaska, that mine would have
to be closed. What he did not say was that in about 1993 the Greens
Creek mine had to be idled because of low metal prices and was not re-
started until 1995. During that shutdown the owners of the mine
seriously considered closing the mine permanently. If a gross royalty
had been in place at that time, the mine would have been idled sooner
and it would have been idle longer, and likely would have been closed
and reclaimed. Rather than that occurring, the mine was able to re-
start and from 1995 to the present time, that mine has employed 260
direct workers and has been the largest tax payer to the local Juneau
Borough. That is 14 years of excellent jobs plus significant local tax
payments to the local municipality.
A reasonable net proceeds royalty following the State of Alaska or
State of Nevada approach would not have those negative impacts. Under a
net proceeds royalty the royalty is not a parasite that will kill a
mine. Under a net proceeds royalty, when the miner is successful, the
government also receives a direct payment. All those times when the
miner is working hard but is loosing money or is just breaking even,
the government is still benefiting through taxes paid by the mine
employees, and through the associated economic activity that supports
the mine and the taxes paid by the employees of those support
companies. All of these benefits cease if a gross royalty forces the
mine to close.
As stated above, 5.796 adds several types of uncertainty. These are
uncertainties that are in addition to a business that is already
wrought with geologic, metallurgical, operating cost, and metal price
uncertainties.
The ultimate uncertainty is one of land tenure. Without land tenure
certainty, companies will not explore or build mines. Persons and NGOs
opposed to all mining would use the provisions of 5.796 to block every
mine project. The provision for closing lands to mining after a company
has spent large sums of money exploring will in itself mean the end of
all future mines. Opponents will have new ways in which they can use to
harass, extend and block projects with the result that companies will
not bother to explore on federal lands in the U.S.
There is no need or justification to evaluate lands for more set-
asides. Such evaluations have been done throughout the country on
numerous occasions and a huge amount of federal land is already
completely off-limits to any resource development. Additionally, in
Alaska, the ``No More'' intent language of the Alaska National Interest
Lands Conservation Act (ANILCA) promised that the need for national
parks, preserves, monuments, refuges, wild & scenic rivers, special
conservation areas, wilderness designations, etc. has been satisfied.
The promise was that no more administrative closures were appropriate
and no more congressional closures were appropriate.
S.796 also contains several points where challenges can be made by
project opponents that would tic up the permitting of a project. Within
the Clean Water Act, Clean Air Act, etc. there are already many venues
that project opponents can harass, extend and block projects. However,
this legislation will add several more ways to block projects.
We could go into considerably more detail and delineate the
specifics for each point. However the conclusion would be the same.
We urge that 5.796 be tabled and that it not proceed any further.
______

Statement of Jane Danowitz, Director, Pew Campaign for Responsible
Mining, Pew Charitable Trusts
After 137 years, this may be the year. Last month, the Senate
Energy and Natural Resources Committee heard testimony on reform of the
1872 Mining Law. Secretary of the Interior Ken Salazar testified ``It
is time to make reform of the Mining Law part of our agenda of
responsible resource development.'' He later commented We arc
committing significant resources from the Department of Interior to get
this done. I think there is a possibility we can get mining reform done
in this Congress.'' (Associated Press. July 14, 2009)
Attached you will find recent editorial support for reform of the
1872 Mining Law as momentum continues to build. The enclosed editorials
are from the New York Times, the Salt Lake Tribune, the Reno GaEette-
Journal and the Denver Post.
As the Denver Post editorial board notes: ``The political stars
Finally may be aligned for a much-needed update to this antiquated law.
Now, our federal lawmakers need to step up and make sure the changes go
far enough and make a real difference.''
If you have questions or would like any additional information,
please feel free to contact Velma Smith, Campaign Manager for the Pew
Campaign for Responsible Mining, at [email protected] or
202.887.8859.