[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
THE EFFECT OF FEDERAL MINING FEES AND PROPOSED FEDERAL ROYALTIES ON
STATE AND LOCAL REVENUES AND THE MINING INDUSTRY
=======================================================================
FIELD HEARING
before the
SUBCOMMITTEE ON ENERGY
AND MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MAY 15, 1999, RENO, NEVADA
__________
Serial No. 106-36
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
or
Committee address: http://www.house.gov/resources
______
U.S. GOVERNMENT PRINTING OFFICE
58-947 WASHINGTON : 1999
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana GEORGE MILLER, California
JAMES V. HANSEN, Utah NICK J. RAHALL II, West Virginia
JIM SAXTON, New Jersey BRUCE F. VENTO, Minnesota
ELTON GALLEGLY, California DALE E. KILDEE, Michigan
JOHN J. DUNCAN, Jr., Tennessee PETER A. DeFAZIO, Oregon
JOEL HEFLEY, Colorado ENI F.H. FALEOMAVAEGA, American
JOHN T. DOOLITTLE, California Samoa
WAYNE T. GILCHREST, Maryland NEIL ABERCROMBIE, Hawaii
KEN CALVERT, California SOLOMON P. ORTIZ, Texas
RICHARD W. POMBO, California OWEN B. PICKETT, Virginia
BARBARA CUBIN, Wyoming FRANK PALLONE, Jr., New Jersey
HELEN CHENOWETH, Idaho CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California CARLOS A. ROMERO-BARCELO, Puerto
WALTER B. JONES, Jr., North Rico
Carolina ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas PATRICK J. KENNEDY, Rhode Island
CHRIS CANNON, Utah ADAM SMITH, Washington
KEVIN BRADY, Texas WILLIAM D. DELAHUNT, Massachusetts
JOHN PETERSON, Pennsylvania CHRIS JOHN, Louisiana
RICK HILL, Montana DONNA CHRISTIAN-CHRISTENSEN,
BOB SCHAFFER, Colorado Virgin Islands
JIM GIBBONS, Nevada RON KIND, Wisconsin
MARK E. SOUDER, Indiana JAY INSLEE, Washington
GREG WALDEN, Oregon GRACE F. NAPOLITANO, California
DON SHERWOOD, Pennsylvania TOM UDALL, New Mexico
ROBIN HAYES, North Carolina MARK UDALL, Colorado
MIKE SIMPSON, Idaho JOSEPH CROWLEY, New York
THOMAS G. TANCREDO, Colorado RUSH D. HUNT, New Jersey
Lloyd A. Jones, Chief of Staff
Elizabeth Megginson, Chief Counsel
Christine Kennedy, Chief Clerk/Administrator
John Lawrence, Democratic Staff Director
------
Subcommittee on Energy and Mineral Resources
BARBARA CUBIN, Wyoming, Chairman
W.J. (BILLY) TAUZIN, Louisiana ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas NICK J. RAHALL II, West Virginia
CHRIS CANNON, Utah ENI F.H. FALEOMAVAEGA, American
KEVIN BRADY, Texas Samoa
BOB SCHAFFER, Colorado SOLOMON P. ORTIZ, Texas
JIM GIBBONS, Nevada CALVIN M. DOOLEY, California
GREG WALDEN, Oregon PATRICK J. KENNEDY, Rhode Island
THOMAS G. TANCREDO, Colorado CHRIS JOHN, Louisiana
JAY INSLEE, Washington
------ ------
Bill Condit, Professional Staff
Mike Henry, Professional Staff
Deborah Lanzone, Professional Staff
C O N T E N T S
----------
Page
Hearing held May 15, 1999........................................ 1
Statements of Members:
Bryan, Hon. Richard, a Senator in Congress from the State of
Nevada, letter to Mr. Gibbons.............................. 6
Cubin, Hon. Barbara, a Representative in Congress from the
State of Wyoming, prepared statement of.................... 5
Gibbons, Hon. Jim, a Representative in Congress from the
State of Nevada............................................ 1
Additional material submitted by......................... 000
Prepared statement of.................................... 3
Statements of witnesses:
Carpenter, Ann, Vice President, Exploration and Business
Development, Nevada Colca Gold, Inc., Reno, Nevada......... 81
Prepared statement of.................................... 82
Coyner, Alan R., Administrator, Nevada Division of Minerals.. 10
Prepared statement of.................................... 13
Additional material submitted by................................. 00
Dempsey, Stan, Chairman, Royal Gold, Incorporated, Denver,
Colorado................................................... 70
Prepared statement of.................................... 72
Additional material submitted by......................... 00
Drozdoff, Leo M., Chief, Bureau of Mining Regulation and
Reclamation, Nevada Division of Environmental Protection,
Carson City, Nevada........................................ 56
Prepared statement of.................................... 57
Letter to Ms. Cherie Sexton.............................. 65
Letter to Ms. Cherie Sexton.............................. 109
Letter to Mr. Paul McNutt,............................... 125
Letter to Mr. Dave Aberswerth and Bob Anderson,.......... 129
Letter to Mr. Bob Anderson,.............................. 138
Fields, Russell A., President, Nevada Mining Association..... 6
Prepared statement of.................................... 8
Guinn, Hon. Kenny C., Governor, State of Nevada, prepared
statement of............................................... 35
Additional material submitted for the record by:
Ingle, Hugh, President, Nevada Miners and Prospectors
Association, Yerington, Nevada............................. 83
Prepared statement of.................................... 84
Kennedy, Larry, Exploration Manager, Battle Mountain Gold,
Reno, Nevada...............................................
Lewis, F. W., F.W. Lewis, Incorporated, Reno, Nevada......... 86
Prepared statement of.................................... 87
Miller, Glenn C., Cochair, Mining Committee, Toiyabe Chapter,
Sierra Club, Reno, Nevada.................................. 41
Prepared statement of.................................... 43
Myers, Tom, Director, Great Basin Mine Watch, Reno, Nevada... 44
Prepared statement of.................................... 47
Parratt, Ronald L., Commissioner, Commission on Mineral
Resources, State of Nevada................................. 25
Prepared statement of.................................... 26
Rhoads, Dean A., Chairman, Natural Resource Committee, Nevada
State Legislature.......................................... 35
Prepared statement of.................................... 38
Snow, Charles D. Consulting Geologist, Exploration Mining, &
Environmental, Utah............................................ 00
Soberinsky, Victoria, Deputy Chief of Staff for Governor
Kenny Guinn, State of Nevada............................... 33
Additional material submitted:
Backgound Memo from the Committee............................ 104
Federal Register, Notice of Intent and scoping............... 120
Loptien, Greg D., Sparks, Nevada, prepared statement of...... 105
Western Governors' Association, letters and prepared
statement of............................................... 113
Women's Mining Coalition, Reno, Nevada....................... 157
Guinn, Hon. Kenny C., Governor, State of Nevada, prepared
statement of........................................... 35
THE EFFECT OF FEDERAL MINING FEES AND PROPOSED FEDERAL ROYALTIES ON
STATE AND LOCAL REVENUES AND THE MINING INDUSTRY
----------
SATURDAY, MAY 15, 1999
House of Representatives,
Subcommittee on Energy
and Mineral Resources,
Committee on Resources,
Reno, Nevada.
The Subcommittee met, pursuant to call, at 2 p.m. at the
Washoe County Commission Chambers, 1001 E. 9th Street, Building
A, Reno, Nevada, Hon. Jim Gibbons presiding.
STATEMENT OF HON. JIM GIBBONS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEVADA
Mr. Gibbons. Ladies and gentlemen, it's my honor to open
this Subcommittee on Energy and Mineral Resources hearing here
in Nevada. To begin with, I want to welcome all of you here.
We're going to make a slight change in the format simply
because some of the witnesses that were on the first panel have
been unavoidably detained, so we will end up starting with the
second panel.
Let me also tell you that at the end of all of the hearing
time for those people that are on scheduled panels, we're going
to try to open it up, time permitting, for an open mike to let
those public citizens out here that want to have a voice to be
heard, we're going to offer them a minute or a minute and a
half--I know that sounds like a short time, but when the TV
cameras are on you, it's a long time.
So figure out what you're going to want to say. We'll try
to open it up so you will have an opportunity, if you weren't
on one of the panels to begin with.
Let me also say that this hearing today is to hear
testimony on the effect of Federal mining fees and proposed
Federal royalties on State and local revenues and the mining
industry, so we want to somewhat focus it down a little so we
don't get too far adrift and start dividing our attention and
focus on areas that may not be applicable to today's hearing.
Before I get to my remarks, I'm going to advise all of
those panels that we have listed here that I will swear you in.
This is an official congressional hearing and you will be
testifying under oath, and so I just want to advise you of the
procedure that before we start with each of you, we will ask
you to take an oath, which I will have you stand and administer
to you.
Let me begin this morning by welcoming all of you here to
this hearing, and we all know that Nevada is the largest gold
producing State in the country and the third largest gold
producer in the world. It's my honor and pleasure to welcome
and thank you for taking time out of your busy schedules to
share your thoughts on mining with this Committee. Today, we'll
hear what I think is very important testimony on the effect of
existing Federal fees such as the $100 per claim holding fee in
addition to proposed Federal fees, such as royalties, on the
mining industry, State and local economic activity and
revenues.
The Committee also wishes to gather information on the
probable effects of various existing and proposed Federal fees
on trends in our Nation's domestic mineral exploration,
production, and reserves.
Mining is a basic economic activity necessary to all
mankind. The knowledge and use of metals is so important to
human civilization that the progress of early man is marked by
the advancement in his knowledge of metals. Man's most
primitive period in tool making was known, of course, as the
Stone Age. Man's subsequent technological advancements for the
next 2,500 years is characterized by his increasing ability to
work with metals, and the periods of this advancement are
divided into the Copper Age, the Bronze Age, and the Iron Age.
Now, as a former mining geologist, myself, and a cochairman
of the Congressional Mining Caucus, let me say that I have a
deep appreciation and understanding of Nevada's mining
industry. Nevada, the Nation's leader in gold production, has
30 operating gold producing companies that employ more than
14,000 people; and these people mine more than $3 billion worth
of metals annually, and Nevada alone provides an annual direct
contribution to the Federal Government of more than $113
million.
As the second largest employer in the State, mining
provides $1.5 billion in personal, business and State and local
government revenues.
These numbers make it easy to realize why mining is such an
important part of Nevada. Around the globe mining continues to
be a basic economic activity which supplies strategic metals
and minerals that are essential for modern agriculture,
construction, and manufacturing.
A recent study by the National Research Council concluded
that one of the primary advantages of the United States, that
it possesses over it's strongest industrial competitors Japan
and western Europe, is our domestic resource base.
The domestic mining industry provides about 50 percent of
the metal used by U.S. manufacturing companies. The United
States is among the world's largest producers of many important
metals and minerals, particularly copper, gold, lead,
molybdenum, silver, and zinc, and still has substantial
domestic reserves of these metals.
Twelve western States containing more than 92 percent of
U.S. public land account for nearly 75 percent of U.S. domestic
metal production. Thus, much of the United States' future
mineral supplies will likely be found on public lands in the
West.
As I'm sure everyone here knows, the Second Congressional
District, which I have the privilege of representing in
Congress, encompasses some of the most important mining areas
in the United States. Precious metal mining constitutes the
majority of economic activity in the north central and
northeastern parts of Nevada.
One of the reasons why this Committee selected Reno for
this hearing is not simply because I live here, but because
Nevada is an important public lands mining State, with more
than 87 percent of the Nevada lands managed by the Federal
Government; and mining accounts for approximately 9 percent of
our State's gross State product. Consequently, any detrimental
effects of Federal mining policy are going to have a serious
consequence to the mining industry and to the livelihoods of
families across this State of Nevada.
Some seem to believe that mining doesn't matter in this new
age. They think that the future of mankind can be secured
without basic material resources. They often think that if they
produce words and ideas in the ``information age,'' then
nothing else is necessary. Well, they're wrong.
Mining matters to everyone. Mining makes our civilization
and high living standards possible. Everything you will use
today began in a mine. Everything you do today depends on
mining. Today we'll examine the existing and proposed Federal
policies, particularly those policies relating to royalties and
fees toward mining on Federal lands.
Hopefully, what we learn here today will help us find out
the consequences that these policies have had or will have on
those who would invest their capital toward finding mineral
deposits and developing mines.
There is an old adage out there. Many of you know it, and
we're trying to spread it as far as we possibly can, and it
goes: ``If it isn't grown, it has to be mined.'' And I think
that is an important thought for all of us to maintain. With
that, it's time for this hearing to begin.
[The prepared statement of Mr. Gibbons follows:]
Statement of Hon. Jim Gibbons, a Representative in Congress from the
State of Nevada
Welcome to Nevada, the largest gold producing state in the
Country and the third largest gold producer in the world. It is
my honor and pleasure to welcome and thank you for taking time
out of your busy schedules to share your thoughts on mining
with this Committee.
Today we will hear important testimony on the effect of
existing Federal fees, such as the $100 per claim holding fee.
We will also hear testimony about the effect of proposed
Federal fees, such as royalties on the mining industry, on
state and local economic activity and revenues. The Committee
also wishes to gather information on the probable effects of
various existing and proposed Federal fees on trends in our
nation's domestic mineral exploration, production and reserves.
Mining is a basic economic activity necessary to mankind.
The knowledge and use of metals is so important to human
civilization that the progress of early man is marked by the
advancement in his knowledge of metals. Man's most primitive
period of tool-making is known as the Stone Age. Man's
subsequent technological advancement for the next 2500 years is
characterized by his increasing ability to work metals, and the
periods of this advancement are divided into the Copper Age,
Bronze Age and Iron Age.
As a former mining geologist and Co-Chairman of the
Congressional Mining Caucus, I have a deep appreciation and
understanding of Nevada's mining industry. Nevada, the nation's
leader in gold production, has 30 operating gold producing
companies that employ more than 14,000 people. These people
mine more than $3 billion worth of metals annually. Nevada
alone provides an annual direct contribution to the Federal
Government of more than $113 million. As the second largest
employer in the State, mining provides $1.5 billion in
personal, business, and state and local government revenues.
These numbers make it easy to realize why mining is such an
important part of Nevada.
Around the globe, mining continues to be a basic economic
activity which supplies strategic metals and minerals that are
essential for modern agriculture, construction and
manufacturing. A recent study by the National Research Council
concluded that one of the primary advantages that the United
States possesses over its strongest industrial competitors,
Japan and western Europe, is its domestic resource base. The
domestic mining industry provides about 50 percent of the metal
used by U.S. manufacturing companies. The United States is
among the world's largest producers of many important metals
and minerals, particularly copper, gold, lead, molybdenum,
silver and zinc and still has substantial domestic reserves of
these metals.
Twelve western states, containing more than 92 percent of
U.S. public land, account for nearly 75 percent of U.S.
domestic metal production. Thus, much of the United States
future mineral supplies will likely be found on public lands in
the West.
As I'm sure everyone here knows, this Congressional
district which I represent in Congress, encompasses some of the
most important mining areas in the United States. In addition,
precious metals mining constitutes the majority of economic
activity in the north central and northeastern parts of Nevada.
One of the reasons why the Committee selected Reno for this
hearing is because Nevada is an important public lands mining
state, with 87 percent of Nevada's lands owned by the Federal
Government and mining accounting for approximately 9 percent of
the Gross State Product. Consequently, any detrimental effects
of Federal mining policy are going to have serious consequences
to the mining industry and to the livelihoods of families
across this great State.
Some seem to believe that mining doesn't matter in this new
age. They think that the future of mankind can be secured
without basic material resources. They think that if they
produce words and ideas in the ``information age'' then nothing
else is necessary. They are wrong.
Mining matters to everyone. Mining makes our civilization
and our high living standards possible. Everything you will use
today began in a mine. Everything you do today depends on
mining.
Today we will examine existing and proposed Federal
policies, particularly those policies relating to royalties and
fees, towards mining on Federal lands. Hopefully, what we learn
today will help us find out the consequences that these
policies have had or will have on those who invest their
capital toward finding mineral deposits and developing mines.
Remember if it isn't grown, it has to be mined!
With that it is time to begin. Will the first panel please
be seated.
[The information follows:]
Letter to Participants from Hon. Harry Reid, a Senator in Congress from
the State of Nevada
The Hon. Harry Reid,
U.S. Senate,
Washington, DC,
May 14, 1999.
Dear Hearing Participants:
I want to first thank Congressman Gibbons for allowing a statement
to be read on my behalf, and I would also like to thank him for
arranging this hearing.
The mining industry is an important part of Nevada's economy.
Furthermore, our mining industry employs thousands of Nevadans who
would otherwise be hard pressed to find employment in other areas.
This past week, I was able, through my seat in the Appropriations
Committee, to include some language that will ensure that the
Department of Interior takes into account a study that was mandated by
Congress last year. This study is being conducted by the National
Academy of Sciences and will cost nearly $1 million. To ignore this
study, as is Secretary Babbitt's intention, is a sheer waste of
taxpayer monies.
Again, I would like to thank Congressman Gibbons for his hard work
on this issue, and I only wish that I could be there with you today.
With all best wishes,
Sincerely,
Harry Reid,
United States Senator.
______
Statement of Hon. Barbara Cubin, a Representative in Congress from the
State of Wyoming
Our domestic hard rock mining industry has long utilized the public
lands of the Western United States and Alaska as its primary
exploration base. Indeed, since 1866 approximately three million acres
of mineral rights have been patented to discoverers of valuable
deposits of gold, silver, copper, lead, zinc, and many other mineral
commodities which fall within the purview of the general mining laws.
Of course, this figure represents only a small fraction of the public
domain of this Nation (my home state of Wyoming alone is twenty times
larger) but it is critical to the health of our industry because as
geologists like to say ``ore deposits are where you find them.''
An early champion of these western miners was President Abraham
Lincoln. Indeed, only a few hours before leaving for Ford's Theater on
April 14, 1865, Mr. Lincoln wrote the following in a note to House
Speaker Schulyer Colfax:
``I have very large ideas of the mineral wealth of our Nation.
I believe it practically inexhaustible. It abounds all over the
western country, from the Rocky Mountains to the Pacific, and
its development has scarcely commenced . . . . Immigration,
which even the war has not stopped, will land upon our shores
hundred of thousands more per year from overcrowded Europe. I
intend to point them to the gold and silver that waits for them
in the West. Tell the miners from me, that I shall promote
their interests to the utmostof my ability; because their
prosperity is the prosperity of the Nation, and we shall prove
in a very few years that we are indeed the treasury of the
world.''
I would note that President Lincoln wasn't concerned with
collecting fees from the western miners--President Polk had done away
with attempting to collect mining royalties in 1848--rather, his focus
was upon stimulating the economy of a still rather new nation. But, one
hundred thirty years later this doesn't seem to be a concern of
President Clinton one iota. In this Administration's zeal to protect
the environment at all costs, and balance the budget on the backs of
commodity producers, a flurry of user fees, tax changes and royalty
proposals have found their way to Capitol Hill. Supplementing proposed
law changes are rulemakings, Solicitor opinions and case adjudications
which have not been subject to the legislative process to insure common
sense prevails. And I, for one, believe that is what has been missing
lately from Interior Department edicts.
Our hearing today is intended to solicit views on this topic from
those in the know--elected officials, state mining regulators, mining
industry folks and concerned environmental advocates. I trust the
record we are beginning to establish with this first of several planned
field hearings in western venues will show there are negative impacts
upon our local communities and state treasuries from poorly thought out
policies advanced by the Clinton Administration. We are following in
the wake of the National Academy of Sciences (NAS) panel who came to
Reno recently to gather information on the mining regulatory
environment. That panel was not charged with examining fee impacts, as
we will do today, but we anxiously await its objective verdict on the
necessity for the extraordinary changes in the surface management
regulations proposed by Secretary Babbitt in February of this year.
The loss of mineral exploration jobs in this country over the last
several years is well documented. If we lay off the prospecting end of
the business sooner or later there are no reserves to replace those
mined and fashioned into the products society demands. Oh yes, we may
be able to import gold the chip makers need for the tech revolution, or
platinum for automobile catalytic converters, etc. but not without
doing damage to our already outrageous balance of trade, and not
without taking good jobs away from Americans. We must think through the
consequences of any legislative ``fixes'' sought by special interest
groups as well as administrative rulemaking proposals, before taking or
allowing actions which have been deemed to be in the ``public
interest'' simply because the advocates for the changes have said so
over and over again without sufficient rebuttal by affected parties. Of
course, these folks have been too busy trying to make a living from
mining, or are elected officials thousands of miles from the beltway
who must legislate in the wake of the fed's unintended (and intended?)
consequences. So we have come to you. Let's hear what you have to say.
______
Letter to Mr. Gibbons from Hon. Richard Bryan, a Senator in Congress
from the State of Nevada
United States Senate,
Washington, DC.
May 15, 1999
Congressman Jim Gibbons,
400 South Virginia Street
Reno, Nevada 89501
Dear Congressman Gibbons:
Thank you for holding an oversight hearing in Reno today to discuss
the effect of Federal mining fees and proposed Federal royalties on
state and local revenues and the mining industry and its employees. As
you know, mining is the second largest industry in the State of Nevada.
In addition to direct employment in mining, there are also thousands of
jobs in the State related to providing goods and services needed by the
industry.
I regret that previous commitments prevent me from attending this
hearing and I appreciate your efforts in bringing these important
issues to the attention of our constituents.
Sincerely,
Richard H. Bryan,
United States Senator.
Mr. Gibbons. I would ask the second panel to come up here
and take a seat. And let me say that we're going to try to keep
everybody to a certain time limit. You're welcome to summarize
your statements. We will, of course, without objection, admit
your written testimony for the record. It will be complete as
it is submitted, and with that, I'd like to have the first
panel stand, so I can administer the oath to them.
[Witnesses sworn.]
Mr. Gibbons. Let me take this moment to introduce our panel
here. We have Russ Fields, President, Nevada Mining Association
from Reno, Nevada; Alan Coyner, Administrator, Nevada Division
of Minerals, Carson City; Ron Parratt, Commissioner, Commission
on Mineral Resources for the State of Nevada from Reno.
Gentlemen, welcome, and we'll start with Mr. Fields. It's
all yours.
STATEMENT OF RUSSELL A. FIELDS, PRESIDENT, NEVADA MINING
ASSOCIATION
Mr. Fields. Thank you, Congressman.
I'm Russ Fields. I'm President of the Nevada Mining
Association. We appreciate the Committee holding this field
hearing in Reno.
Mining has always played an important role in Nevada's
economy since before statehood. In 1998, Nevada mines led the
Nation in precious metals production, producing some 76 percent
of domestic gold and 38 percent of the Nation's silver, among
many other minerals.
Any Federal action concerning hard rock mining has the
potential to significantly impact Nevada and Nevada's mining
industry. At the end of 1998, there were more than 13,200 men
and women directly employed at the mines, and another estimated
43,000 jobs involved with providing goods and services to the
industry.
The direct mining jobs are the highest paid sector in our
State
economy. With an average annual salary of $50,000, this is well
above the average salary in Nevada of less than $29,000. Direct
mine annual payroll exceeds $650 million in Nevada.
Mining contributed over $1.81 billion to Nevada's personal
incomes each year over the last couple of years. Mining's tax
payments to State and local government in the 1996-1997 tax
year totalled approximately $125.5 million.
These tax payments come in the forms of sales and use tax,
property tax, and Net Proceeds of Mines Tax. A large portion of
these taxes stay with the local government. Over $1 billion in
State and local taxes have been paid by the Nevada mines from
1987 through last year.
Producers of metals such as gold and silver and copper are
price takers. That is, the price of their product is set in the
world market place that cannot be affected by any single
producer or groups of producers. Given this fact, the only
business variable that a mine can control in the long run is
its cost of production.
As an example: We're currently experiencing 20-year lows in
the price of gold. In 1998, Nevada mines reduced their direct
costs of production by an average of approximately $15 per
ounce. This was done through gains in productivity brought
about by improved efficiency and mining of higher grade
material where possible.
Certain capital expenditures and exploration activities are
being delayed, as well, to conserve cash. Unfortunately
approximately 1,550 direct mining jobs were lost during 1998 as
a result of tightening expenses. There is obviously a limit to
how far expenses can be reduced.
As costs rise or prices fall, or both, what previously may
have been counted on mining companies books as mineable
reserves, may fall into an unmineable category. It's no longer
ore because this material can no longer be mined at a profit.
If a mine's ore reserves are reduced due to economics, the
life of a mine is shortened and the economic benefit of mining
comes to an earlier end. Increased fees, costs, and royalties
imposed by the Federal Government result in reduced ore
reserves and therefore reduced mine lives. The result is a loss
of employment and positive economic benefits on counties and
communities.
A significant part of the discussion over the General
Mining Law has surrounded the issue of royalty. Any royalty is
an added expense and will have a negative impact on mining in
communities in which mining takes place. However, if there is
to be a royalty, a net proceeds type of royalty seems to fit
hard rock mineral production the best, because it takes into
account the cost of extracting the metal from the rock and the
fact that producers have no opportunity to pass costs through
to customers.
When prices are low, as they are now for gold and copper,
for example, the royalty amount will be lower; but under net
proceeds, operations can stay in business and continue to
employ people and make their contributions to the local
economies.
When prices are higher, certainly the royalty amount will
be higher. This is fair and equitable to the public and to the
industry as well.
In summary, any increase in Federal fees reducing
regulatory costs, or excuse me, including regulatory costs,
fees and royalties, has the exact same impact on a mining
company's bottom line as does the reduction in the price
received from the mineral product.
Currently mining is facing many increased costs in this
low-priced environment. Together, these increases in costs and
reduction in prices result in impacts on local and State
government as a result of business impacts on the mining
industry. Given this situation, Congress should take great care
as it considers the imposition of new fees and costs on this
industry.
The specific impacts of any fee, royalty, or cost of
compliance should be carefully evaluated.
Thank you very much, and I would like to personally thank
you again, Congressman Gibbons, for holding this hearing in
Nevada.
[The prepared statement of Mr. Fields follows:]
Statement of Russell A. Fields, President, Nevada Mining Association
I am Russ Fields, President of the Nevada Mining
Association. We appreciate the Committee holding this field
hearing in Reno. We are sitting only several hours away from
the greatest gold producing region in North America. The Nevada
Mining Association is the trade association for Nevada's mining
industry. We have approximately 400 members ranging from
several of the largest gold, silver and copper mining companies
in the world to individuals who are interested in mining. Our
members also include industrial minerals producers: miners of
crushed stone, barite, limestone and gypsum, among others.
Suppliers to the industry--those who provide the goods and
services needed to conduct the business of mining--are also
among our membership.
NEVADA'S HARD ROCK MINERAL INDUSTRY
Mining has always played an important role in Nevada's
economy. Indeed, it was the fabulously rich Comstock lode
silver mines, just 17 miles from Reno that provided the
economic engine and population that led to Nevada's becoming a
state in 1864. Over the years, this state has had numerous
episodes of mining for a wide variety of mineral products--
copper, tungsten, lead, zinc, silver, antimony, gypsum, barite
and the list goes on. Today, gold is by far our most important
mineral product. In 1998, Nevada mines led the nation in
precious metals production, producing some 76 percent of the
domestic gold and 38 percent of the nation's silver.
Although Nevada's mining industry faces a number of
important market, technical and regulatory challenges, the
industry has developed a large, efficient and economically
viable capital base that is fundamentally sound and sustainable
well into the next century. This capital base has been built
through investment of over $10 billion in expenditures in plant
and equipment and exploration since 1980.
Any Federal action concerning hard rock mining has the
potential to significantly impact Nevada and Nevada's mining
industry. This state is approximately 87 percent owned by the
Federal Government. These lands are held in the form of
military withdrawn lands, wilderness, a national park and
public lands managed by the Department of Interior, Bureau of
Land Management and the U.S. Forest Service. The military
lands, wilderness and park are, of course, off limits to
mining. It is the BLM and Forest Service managed lands where a
miner operating under the General Mining Law of the United
States and myriad other Federal and state laws and regulations
has an opportunity to develop hard rock mineral resources.
ECONOMIC IMPACTS OF MINING IN NEVADA
At the end of 1998, there were more than 13,200 men and
women directly employed by the mines and another estimated
43,000 jobs were involved in providing goods and services to
the industry. The direct mining jobs are the highest paid
sector in our state economy, with an average annual salary of
$50,000. This is well above the average salary in Nevada of
less than $29,000. Mining contributed over $1.81 billion to
Nevadans' personal incomes in 1997.
In addition to the significant employment in Nevada's rural
counties, with direct mine annual payroll exceeding $650
million, tax payments to state and local government in 1996-97
totaled approximately $125.5 million. These tax payments come
in the form of sales and use tax--modern mining is extremely
capital intensive with some single pieces of equipment costing
in the millions--property tax and net proceeds of mines tax. A
large portion of these taxes stays with the local government
due to state tax distribution formulae. Over $1 billion in
state and local taxes have been paid by Nevada mining from 1987
through last year.
The key to sustaining tax revenues from Nevada's minerals
industry is maintaining capital investment in the industry's
production capacity and in mineral exploration. Nevada's unique
geology is clearly the most important factor in attracting
capital investments and exploration expenditures. However,
Nevada's tax and regulatory structure also play a key role in
industry investment decisions. A reasonable tax and regulatory
environment are critical to maintaining a world class minerals
industry capable of sustaining production here in our state.
More importantly, a consistent, reasonable Federal mineral
policy is essential for the future of mining, both here and
throughout the U.S.
THE BUSINESS OF MINING
There are some facts about modern hard rock mining that are
relevant. First, for metals such as gold silver and copper,
miners are price takers. That is, the price of their product is
set in the world market place that cannot be effected by any
single producer. The dynamics of the markets also preclude any
group of producers from being able to have any significant
effect on the price. Given these facts, the only business
variables that a mine can control in the long run are its costs
of production.
As an example, we are currently experiencing 20-year lows
in the price of gold. In 1998, Nevada mines reduced their
direct cost of production by an average of approximately $15
per ounce. This was done through gains in productivity brought
about by improved efficiency and mining of higher-grade
material where possible. Certain capital expenditures and
exploration activities are being delayed as well to conserve
cash. Unfortunately, approximately 1,550 direct mining jobs
were lost during 1998 as a result of tightening down on
expenses. Many others involved in providing goods and services
have also struggled during this period. That situation
continues today.
Second, the regulatory climate for modern mining adds costs
and time delays. The modern mining industry has largely agreed
with the vast improvements in protection of land, water, air
and wildlife over the past 15 to 20 years. These improvements,
which absolutely distinguish modern mining's environmental
practices from historic activities, do add significant costs to
doing business. However, to the extent these changes are
reasonable and actually benefit the environment and improve
safety, mining has been supportive.
Third, because metals and other valuable minerals are
distributed unevenly in the earth's crust, geologists focus on
identifying concentrations of metals or minerals that have the
prospect of being mined and produced at a profit.
Concentrations that have this property are called ore deposits.
Because the term ore, by definition, implies that it can be
developed and produced at a profit, what is ore and what is not
changes routinely with changes in price and changes in costs.
As costs rise, or prices fall or both, what previously may have
been counted in a mining company's books as ore reserves, may
fall into an unmineable category. It is no longer ore because
it can't be mined at a profit. If a mine's ore reserves are
reduced due to economics (or any other reason), the life of the
mine is shortened and the economic benefit of mining comes to
an earlier end.
EFFECTS OF FEDERAL FEES AND ROYALTY
The foregoing facts about the business of mining are well-
recognized in our industry, but they bear repeating in some
detail because increased fees, costs, royalties and so on
imposed by the Federal Government result in reduced ore
reserves and therefore, reduced mine lives. The obvious result
is the loss of employment and the positive economic impacts on
communities.
Exploration is one of the first mining related activities
to suffer the effects of higher costs brought on by fees,
royalties and so on, or lower prices. Exploration is the effort
mining companies make to discover new mineral deposits to take
the place of ore that is mined. Nevada, and the United States,
has seen significant decreases in exploration activities over
the past several years. In Nevada, the state Division of
Minerals reported a 32 percent decline in exploration
expenditures for 1997.
A significant part of the discussion over the General
Mining Law has surrounded the issue of royalty. Any royalty is
an added expense and will have a negative impact on mining and
the communities in which mining takes place. However, if there
is to be a royalty, a net proceeds type royalty seems to fit
hard rock mineral production best because it takes into account
the costs of extracting the metal from the rock and the fact
that producers have no opportunity to pass royalty through to
customers. When prices are low, as they are now for gold and
copper, the royalty will be lower, but under net proceeds,
operations can stay in business, jobs and contributions to
local economies can be maintained. When prices are higher, the
royalty will also be higher. This is fair and equitable to both
the public and to the industry.
As opportunities in the United States are made less
attractive because of more regulation and higher costs,
including the effect of fees and royalties, the mining
companies will leave for foreign venues. Mining capital is
highly mobile. In this regard, Nevada and the United States are
competing for mining business with the likes of Chile,
Australia, Indonesia, South Africa and many other places that
host economically recoverable mineral deposits. This results in
lost opportunity for domestic creation of wealth through mining
and the positive economic impacts at all levels.
CONCLUSION
In summary, any increase in Federal fees, including
regulatory costs, maintenance fees, royalties or the removal of
any benefit, such as percentage depletion, has the exact same
impact on a mining company bottom line as does a reduction in
the price received for the mineral product. Currently, modern
mining is facing many increased costs in a low price
environment. This exacerbates the problem and increases the
impacts on local and state government as a result of business
impacts on the mining industry. This suggests that Congress
should take great care when considering the imposition of new
costs on this industry. The specific impacts of any fee,
royalty or cost of compliance should be carefully evaluated.
We are particularly thankful for the Subcommittee's
decision to come to Nevada to receive information to assist you
in making good decisions.
Mr. Gibbons. Thank you very much. Ladies and gentlemen, as
you have noticed, there is a little light affair over here.
This is the standard procedure. On the table up here, there is
a green, a yellow and a red light. It's just like the stoplight
you have in a traffic stop. When it's green, you can go and
talk all you want; when it's yellow, you ought to be wrapping
it up; and when it's red, remember, I possess the gavel, and
the volume control on the microphone, in order for us to move
along.
Before I go to the next witness, I was reminded that I was
remiss in my duties as the chairman to recognize two
distinguished individuals in the audience, both of whom are
very dear friends, one of whom is more of a dear friend than
the other. Senator Dean Rhoads is here, and my wife,
Assemblywoman Dawn Gibbons, is here. I would like to welcome
them both.
And as well, we have a wonderful group of people from I
should say the ``People For the USA'' represented here as well,
so welcome, everyone.
Mr. Gibbons. Mr. Coyner, the mike is all yours.
STATEMENT OF ALAN R. COYNER, ADMINISTRATOR, NEVADA DIVISION OF
MINERALS
Mr. Coyner. Thank you, Mr. Chairman. I will ask you to have
my testimony at hand because I will be referring to several
charts. My name is Alan R. Coyner, and I'm the Administrator of
the Division of Minerals for the State of Nevada.
The mission of the Division, as promulgated by the
legislature, is to promote, advance and protect mining and the
development and production of petroleum and geothermal
resources in Nevada. In light of that mission, the Division has
an ongoing concern about the negative economic impacts to the
economy of our State from Federal mining fees, regulatory
changes, and proposed royalties.
And certainly, as you know, hard rock mining is an integral
part of Nevada history and the Nevada way of life. It is truly
unique, paralleled but not equaled by any other State in the
Union. And accordingly, Nevada has devoted a lot of time and
energy and resources to maintain a healthy, viable, and above
all, responsible mineral industry.
An essential component of this has been the relationship
between the Federal agencies and the State and has resulted in
what we call the Nevada Model, and it's something with regard
to that cooperative relationship we're rightly and justly proud
of.
This Committee is seeking to ascertain the effect of
Federal mining fees and proposed royalties on State and local
revenues, and with that in mind, I would like to supply you
with data that provides evidence of the linkage between the
regulatory environment and mineral exploration activity in our
State, independent of the commodity price.
The Division conducts an annual exploration survey to
determine the level of mineral exploration activity in Nevada,
and responses are generally received from approximately 50
companies, all of which have exploration programs in the State.
If you look at chart number 1, this is the active claims in
Nevada, and you will see a curve described through the 1980s
and early 1990s of increasing activity peaking in 1991, and
then as rule making was promulgated with regards to the $100
mining claim fee, you will see that that enactment in 1993
resulted in the drop of claims from approximately 400,000 to
150,000 claims.
I've also put on there the price of gold. You can see that
that drop is independent of that price. This drop in claims
resulted in a loss of at least $25 million in annual assessment
expenditures toward the discovery of new deposits and a
redirection of $15 million annually from exploration to the
Federal Treasury.
If you look at chart number 2, this is exploration
expenditures for companies active in Nevada and this looks at
the time period from 1994 through 1998. And you can see that
range for those companies active in the State ranged from $450
million to $1.1 billion worldwide during a time of static or
declining gold prices. But during that same period total
dollars spent in Nevada declined from $154 to $120 million with
a further decrease projected for 1998 of $94 million.
This is somewhat more easily seen in chart number 3 which
is essentially percentage of expenditures, and again for that
time period we can see the rising curve upwards of the rest of
the world and the lowering curve for Nevada from 35 percent
down to about 12 percent projected in 1998. Again this reduces
or eliminates the influence of price, and suggests mining fees,
proposed royalties, and the cost of regulation have negatively
impacted the economy of our State.
Chart 4 I've borrowed from John Dobra, of the University of
Nevada, Reno, and the Natural Resources Industry Institute, and
it confirms the trend that the division has found, and extends
it backward to about 1992, and you can see there, that under
his data, firms active in North America were spending some 60
percent of their budgets in the United States, and that
percentage is now down around 25 percent.
This demonstrates especially that exploration dollars are
extremely liquid and flow internationally.
And with that, I will also note that I've appended Dr.
Dobra's remarks to my testimony. The Division has asked him to
do a study in April of 1999 on the local impacts of this
spending reduction. That report is due in early June, and we
would appreciate the Committee allowing testimony to remain
open to allow inclusion of that final report in June.
In conclusion, there is no question that current Federal
fees and regulations have negatively impacted mineral
exploration activity in the State of Nevada. They have played a
major role in the exodus of exploration dollars and geological
talent from Nevada and the United States to foreign countries.
Successful Federal mining policy must strike a reasonable
balance among the need for regulation, environmental concern,
and economic activity. The exploration surveys conducted by the
Nevada Division of Minerals indicate recent Federal actions
have upset that balance.
Mining claim fees, changes in the 3809 regulations, the
Crown Jewel decision, and the enactment of a Federal royalty
will only serve to increase the uncertainty and hasten the
exodus. Thank you, Mr. Chairman.
Mr. Gibbons. Thank you for a very timely presentation of
the testimony. We'll have it all submitted for the record.
[The prepared statement of Mr. Coyner follows:]
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Mr. Gibbons. Mr. Parratt, the floor is yours.
STATEMENT OF RONALD L. PARRATT, COMMISSIONER, COMMISSION ON
MINERAL RESOURCES, STATE OF NEVADA
Mr. Parratt. Thank you, Mr. Chairman. My name is Ronald
Parratt, and I am here today in my capacity as a commissioner
on Nevada's Commission on Mineral Resources, a position I've
held for the last 8 years.
As background, I have been directly involved in private
industry in mineral exploration in the western United States
for almost 27 years, and I've lived here in Reno the last 20,
working predominantly in Nevada and exploring for gold.
In 1993 the Bureau of Land Management implemented a $100
per mining claim fee, or about $5 per acre that was to be paid
to the Federal Government in August of each year in lieu of the
traditional assessment work or physical exploration that was
previously required annually to keep a mining claim valid.
In 1993, prior to the fee, there were approximately 330,000
active mining claims in Nevada. Following the requirement of
the fee in 1994, the number of active mining claims fell to
around 140,000, or a reduction of almost 60 percent. Although I
don't have comparable numbers for other states, I'm sure that
similar reductions in the number of claims occurred as well.
Certainly in Nevada, some of these claims might have
dropped for normal business reasons, although in my view, the
principle reason, without doubt, was the claim fee. In support,
I'd offer that I was responsible for dropping several thousand
mining claims that year for my employer who was one of Nevada's
larger explorers.
Filing fees paid for 1995, 1996, 1997 and 1998 in Nevada
have generated a total of almost $60 million for the BLM, an
average of almost $15 million a *year, and resulted directly in
a corresponding reduction in exploration spending in Nevada
during that time.
The great majority of mining claims in Nevada, and
certainly throughout the west, are held for exploration
purposes, and only a relatively small percentage of claims are
actually in use for active mining operations.
This means only a small percent of the aggregate mining
claim fees are paid for out of the budgets of individual mining
operations, and that the bulk of these fees are paid for out of
exploration budgets. Again, payment of the fees directly
results in reductions in actual exploration activity and a
reduction in the industry's ability to discover new resources
to replace those that are being mined.
This fee is another added cost for the business of
exploration in Nevada and our country, and reduces the
effectiveness of our precious exploration dollars. Not only
does this hurt the exploration business per se, but also with
the multiplier effect that translates into fewer jobs for those
industries which service exploration groups such as drilling
contractors, laboratories, restaurants and even motel owners.
Much of this activity, of course, is in Nevada's rural
communities.
To put some perspective on the size of this burden to the
exploration business, it's estimated that in 1998 between $90
and $100 million were spent in Nevada on exploration. Mining
claim fees paid to the BLM for that year were $13 million,
which results in adding a budget burden of about 13 percent to
the industry as a whole just to hold Federal land.
For some added perspective, comparable costs for holding
exploration rights on lands in countries who are competing to
get these dollars and jobs are as follows--for comparison, keep
in mind the United States fee is about $5 per acre:
Canada has a variable structure but always less than a
dollar per acre; Mexico again is variable, but always less than
50 cents per acre; Chile, 48 cents per acre; Peru, 80 cents per
acre; and Argentina, 11 cents per acre. New proposals,
including royalties and new reclamation fees are being
considered as well, which would further burden mining companies
and exploration. The cumulative impact of these will be to
further weaken and reduce the effectiveness of our exploration
dollars and has weakened the competitiveness of our domestic
mining industry.
We must do everything possible to keep this from happening
and seek to encourage a strong domestic industry. Thank you.
[The prepared statement of Mr. Parratt follows:]
Statement of Ronald L. Parratt, Commissioner, Commission on Mineral
Resources, State of Nevada
Mr. Chairman and Members of the Resources Committee, my
name is Ronald L. Parratt and I am here today in my capacity as
a Commissioner on Nevada's Commission on Mineral Resources--a
position I've held for the past 8 years. As background, I've
been directly involved in the private sector in mineral
exploration in the western United States for almost 27 years
and have lived here in Reno for the last 20 years working
predominately in Nevada exploring for gold.
In 1993, the Bureau of Land Management implemented a $100
per mining claim fee ($5/acre) that was to be paid to the
Federal Government in August of each year in lieu of the
traditional assessment work or physical exploration that
previously was required annually to keep a mining claim valid.
In 1993, prior to the fee, there were approximately 330,000
active mining claims in Nevada. Following the requirement of
the fee in 1994, about 190,000 claims were dropped and the
number of mining claims fell to about 140,000 or a reduction of
almost 60 percent. Although I do not have comparable numbers
for other states, I'm sure that similar reductions in the
number of claims occurred as well. Certainly in Nevada some of
these claims might have been dropped for normal business
reasons. However in my view, the principle reason was the claim
fee. In support I would offer that I was responsible for
dropping several thousand mining claims that year for my
employer who was one of Nevada's larger explorers. Filing fees
paid for 1995 to 1998 have generated about $60mm for the BLM--
an average of almost $15mm per year and resulted directly in a
corresponding reduction in exploration spending in Nevada
during that time. The great majority of mining claims in
Nevada--and certainly throughout the west--are held for
exploration purposes and only a relatively small percentage of
claims are actually in use for active mining operations. This
means only a small percentage of the aggregate mining claim
fees are paid for out of the budgets of actual mining
operations and the bulk of these fees are paid for out of
exploration budgets.
Again, payment of the fee directly results in reductions in
actual exploration activity and a reduction in the industry's
ability to discover new resources to replace those being mined.
This fee is another added cost for the business of exploration
in Nevada and our country and reduces the effectiveness of our
precious exploration dollars. Not only does this hurt the
domestic exploration business per sec, but also with the
multiplier effect, it translates into fewer jobs for those
industries which service exploration groups such as drilling
contractors assay laboratories and motel owners. Much of this
is in Nevada's rural communities.
To put some perspective on the size of this burden to the
exploration business, it's estimated that in 1998 between $90mm
and $100mm was spent on exploration in Nevada. Mining claim
fees paid to the BLM were about $13mm which results in this fee
adding a budget burden of about 13 percent to the industry as a
whole just to hold Federal land.
For some additional perspective, comparable costs for
holding exploration rights on lands in countries who are
competing to get these exploration dollars and jobs are as
follows; (and for comparison keep in mind that the U.S. Federal
fee is $5/acre) Canada less than $1/acre, Chile $0.48/acre,
Peru $0.80/acre and Argentina $0.11/acre. Mexico is also low
but I don't have an exact figure.
There are of course additional fees paid to hold mining
claims in the U.S. which total about $15/claim per year. New
proposals including royalties and new reclamation fees are
being considered as well which would further burden mining
companies and exploration. The cumulative impact of these will
be to further weaken and reduce the effectiveness of our
exploration dollars and hence weaken the competitiveness of our
domestic mining industry. We must do everything possible to
prevent this from happening and seek to encourage a strong
domestic industry. Thank you.
I'd be pleased to answer any questions.
Mr. Gibbons. Thank you, Mr. Parratt, and I want to
congratulate the first panel here that's testified. Not one of
you got to the red light. We appreciate that.
Let me maybe throw a question out there. I don't know if
Mr. Fields or Mr. Coyner or Mr. Parratt want to answer this,
but my original question is for the audience and I think even
for the record, we need to know a little bit about the
different types of royalty proposals that are out there. I know
that one we talked about already is a gross royalty, versus net
proceeds, versus net smelter return. Maybe if somebody could
just give us a very brief--it's a very technical question, but
if somebody wants to give us just a thumbnail sketch so we can
understand how each one of those impacts the bottom line, and
what each one would produce, if you can.
Mr. Fields. Okay, I will tackle that, Mr. Chairman. This is
Russ Fields, for the record.
Of the three types of royalties you mentioned, let me start
with gross royalty. This is one that has been proposed in the
last several Congresses, and in several bills.
Gross royalty is a royalty that would be imposed on the
gross sales price of the mineral commodity, whether it be gold
or copper, et cetera. It would be applied directly to that
price that is received.
For example: Today the price of gold is about $276. An 8
percent gross royalty, which has been proposed in the past,
would amount to approximately $23 per ounce of gold. As my
testimony indicated, this would be the same thing as a $23 fall
in the price of gold.
It would go right through to the bottom line, bringing the
value received to the mining company then to something like
$253, based on today's gold price.
Now, the problem with that, from the mining company's
standpoint, is that is very close to the cash cost of
production, the direct cost in terms of dollars to produce an
ounce of gold at many of our gold mines here in northern
Nevada.
That means that there is nothing left over to pay back the
cost of capital. There is nothing left over to pay for
administrative overhead and expenses, and, as Mr. Parratt will
attest, there is nothing left to pay for exploration activity
to find the next ore deposit.
I think the result of a gross royalty along those lines
would be a very rapid slowdown in the production of hard rock
minerals here in the State.
I think we would see high grading of ore deposits and
shortening of lives, as I mentioned in my testimony, shortening
of mine lives. And the impacts of such a royalty would be very,
very substantial.
Now, the second type of royalty that has been discussed in
Congress is referred to as a net smelter royalty, and really,
with net smelter and the other type that I will discuss, net
proceeds, the devil is in the details, how you really define
the royalty.
But net smelter royalty for most purposes, would be defined
as taking the gross value of the gross receipts, gross revenues
produced by the minerals.
Again let's use gold as an example. At $276 an ounce, you'd
take that gross $276 and deduct from that the cost of final
refining, producing refined metal out of the door, that is the
gold and silver mix that we produce at our mines, and then
apply the royalty to that, so it's very close to a gross
royalty because the cost of refining as a percentage of the
total cost, is very small.
I have mentioned in my testimony that if there is to be a
royalty, it should be based on a net proceeds type approach.
That's what we do here in the State of Nevada for our taxation
of minerals. It's called the Net Proceeds of Mines Tax.
What that does, is it allows a miner to deduct the cost of
producing the metal and turning the metal into money, so in
other words, the cost of mining, the cost of milling, the cost
of transportation, those costs are allowed to be deducted from
the gross receipts, leaving a net profits number, and that is
the point at which royalty would be affixed, at the net
proceeds level.
It makes more sense in many ways because when the markets
fluctuate so much, when the price is high the royalty amount
will be higher. When the price of the metal is low, the amount
of Royalty will be lower, so it allows a mining company, then,
to perhaps stay in business and then continue to operate even
while it pays a royalty, which may not be the case in the case
of a gross.
That was longer than my testimony I apologize for that.
Mr. Gibbons. You did very well. It was very enlightening to
hear what you say.
Let me turn to Mr. Coyner. Could you maybe explain or
expand a little bit more on the Nevada Model that was in your
testimony so that we can develop that a little further.
Mr. Coyner. One of the largest--or a factor within that
model, is the testimony that Russ just gave. It's a net
proceeds approach on a royalty which, I think implies we're in
this thing together, and that can be extrapolated to a national
sense as well.
These minerals and others in our State are necessary for
our national security, as you well know, and there should be a
participatory process of all the owners in that security.
As we look at the mining companies that are active in the
State, most are public stock companies. A lot of that stock is
held by Americans. So it does imply that we're in this together
and we need to make those decisions together.
The Nevada Model is a subset on that. Essentially the State
agencies, the Federal agencies, the environmental groups, all
the stake holders come together and forge this process as we go
forward in Nevada.
We appreciate that, and that's a very good working
relationship. It resolves differences early. It obviates the
need for lawsuits. It makes for good working relationships and
friendly working relationships.
So that, in essence, is the Nevada Model. It's been copied
by other States which gives testimony to its effectiveness.
Mr. Gibbons. Mr. Coyner, on these charts that you have
submitted to us, is there a point on there which you can
identify for us the time in which the Nevada Model or the net
proceeds implementation took effect in this chart, perhaps to
show if there is a significant downward trend simply due to
Nevada's implementation of a net proceeds royalty?
Do you recall what year we implemented that?
Mr. Fields. Mr. Chairman, this is Russ Fields, for the
record. The Net Proceeds of Mines Tax has been a part of Nevada
since the very early days. In fact, I think it is in the
Constitution that mines shall be taxed on their net proceeds,
so it's a very, very old tax that goes way back before any of,
I think, Mr. Coyner's charts.
I would say that I had the opportunity in 1989 to be very
involved with the State government's efforts to adopt its
reclamation program which--and also its water pollution control
program for mines.
Both of those things happened in 1989, and I think that was
probably, in my recollection, realistically where we could say
that the Nevada Model was born. It was a collective cooperative
effort of State agencies, the Federal Government, the
environmental community, and mining industry, so there, again,
I think that probably predates everything on Mr. Coyner's
charts.
I'm looking at the Active Claims in Nevada chart over my
neighbor's shoulder here, and what happened in 1993 to the
mining claims had nothing to do with the State of Nevada and
had everything to do with the imposition of a $100 per claim
per year holding fee from the Federal Government, so that's
probably the most remarkable thing that is affecting the charts
that I'm looking at here.
Mr. Coyner. Mr. Chairman, I would add that I think that if
Dr. Dobra were here he would express that the 1990s and it's
capital development and development expenditures and also our
production have risen and that is sort of an inertia effect of
all this exploration and activity that we saw in the 1980s and
the early 1990s.
The problem we see now is that that exploration activity
has been curtailed, so the worry is for the future. Certainly,
as we need to replace these reserves Mr. Parratt spoke of, we
have a need to expend those exploration dollars, and they are
not being spent in considerable amounts.
I mean we're talking multi-hundreds of millions of dollars
per year that are not being spent in Nevada, and that's
significant.
Mr. Gibbons. The point I want to make is that the
imposition of Federal royalties, is it your opinion that it
will have a dramatic lowering of the production from the mines
of metals and minerals in this State?
Mr. Coyner. Certainly if the royalty is in any way punitive
or high relative to other countries in the world. Again,
mineral production is a global business. Money flows to where
it is welcome. If those royalties are excessive or judged to be
excessive, production will go off shore.
Mr. Fields. If I may Mr. Chairman, just to add a little bit
to that: Yes, the impact would be immediate. I think the charts
that you see here about what happened to the mining claims,
this speaks to the fact that business will react immediately to
its business conditions. It will not wait. It has other
opportunities.
We could definitely see an exodus certainly first of
exploration, a slowdown of mining, and then decline and
stoppage of mining if the royalty is onerous enough. It would
be very simple to overturn this apple cart right now,
especially with the low price environment that our mines are
dealing with.
Mr. Coyner's Division of Minerals has estimated that
approximately 30 percent of Nevada's nation-leading gold
production is derived from public lands, today. That 30 percent
represents now approximately three million ounces of gold,
which is more than any other State produces, coming right from
Nevada.
Now, that royalty, any Federal royalty would be applied to
that 3 million ounces of gold if something were to happen
today.
I also submit, as you mentioned in your opening remarks,
that the future of the mining industry in Nevada is on public
lands; that 30 percent is going to increase over time if we can
preserve the status quo, because 87 percent of our State is
owned by the Federal Government.
There is simply no other place to explore than on public
lands, so if we were to have a Federal royalty, in the future,
it will be imposed upon any new discoveries that are made on
those Federal lands.
The big IF, though, is will there be any exploration of
those lands? I suspect that there will be much less if there is
a gross royalty. So the imposition of any royalty will have an
immediate negative impact on the State of Nevada, its State
government, its local government, its communities and certainly
the mining industry.
Mr. Gibbons. Well, let me ask each of you to put on a hat
that has a broader perspective and wider vision than just the
State of Nevada. Do any of you have an opinion as to the effect
of a reduction in our mining capability with regard to our
national economy or our national defense, natural security? The
role mining plays nationally would be affected in some way by
this, and if any of you have any thoughts, I'd like to hear
about that.
Mr. Parratt. Well, there is no doubt that everything in our
economy runs from mining because as you said earlier, if it
can't be grown it has to be mined, everything from the
computers we operate, to the building we're in, to the lights
that are illuminating this room are coming from mining. We have
to preserve a strong industry in this country. Mining is very,
very important to our economy.
Mr. Fields. The State of Nevada is blessed with, as you
know, Mr. Chairman, the kind of geology that is conducive to
lots of various types of minerals.
In the past this State has produced tungsten; it's produced
antimony; it's produced molybdenum; it's produced manganese.
The list goes on and on.
Today we're producing gold and silver and copper and a
variety of industrial minerals, but all of these minerals are
somehow used to make this Nation strong. For example, tungsten,
is used in the hardening of steel which is used in weaponry.
We need those, obviously we do. Gold, now, is so important
in electronic components, computers. When this Nation does its
work overseas in the war arena, which we do from time to time,
we have to have gold to make those components work correctly
the first time, every time.
So that is just a small example, and certainly there are
others who'll testify today who have lived the time when we
were in major wars and we needed to have the mineral
commodities that this State can produce, and this Nation can
produce.
Another thing that is important is our mineral production,
especially for gold, is allowing the United States to be a net
exporter of gold. It does contribute to the balance of trade
for this United States, which, it's a contribution. It's
certainly not enough to say that we're going to turn that
balance of trade around, but it's a contribution. Nevada is
doing its part for the balance of trade.
Mr. Gibbons. I just have two final questions for this
panel, and then we'll try to move on.
Mr. Coyner maybe I can direct this to you. The Nevada
Division of Minerals, has it made any estimates of remediation?
I know in the past practice of mining, we have a lot of
abandoned mines out there which no company today would tolerate
or even be permitted to contribute to, but we have the
remediation cost question, I'm sure.
Have you tried to quantify the abandoned mine lands problem
in Nevada in terms of dollars, and do you have any handle on
what the eventual total cost would be to solve this problem?
Mr. Coyner. The Nevada Division of Minerals is charged with
the physical securing of hazardous mines in the State. With the
abandoned mines programs we have, we estimate those numbers to
be in the 50,000 to 100,000-type range in terms of hazardous
openings.
The cost of each of those to remediate is about $500 per
site or so, so that would give you a fee or figure on the
physical hazard side. Now, if we're going to talk about the
environmental hazard side, it's a much larger issue and a much
bigger number.
I don't think anyone in this State has really put their
mind to it yet in terms of what that total is, but let me say
in that regard, that we have recently struck up an interagency
task force of both the State agencies and the Federal agencies
utilizing monies that are coming to us from the BLM to take a
look at exactly that problem and try to get a handle on that.
So in order to put a total number on that right now would
be somewhat premature, and again, it depends on what you call
satisfactory with regards to the remediation. How much, to what
level must you remediate it.
It's a national issue. It's being tackled actively in
places like Colorado, Montana, and California as well, and
we're doing the same here in Nevada, but I really can not put a
number on it here for you today, Mr. Chairman.
Mr. Gibbons. Finally, let me ask a question about
educational outreach. I know all of you have been involved in
that for some time, and maybe you can explain to us for the
Committee and for the record, your educational outreach for
Nevada students with regard to mining.
Mr. Coyner. I will start with that. As you know, Russ
Fields was my predecessor at the Division of Minerals, so we
have both been very actively involved in our education program
there, and we partner that program with the Nevada Mining
Association and with members of the industry.
There are many, many professionals involved in the business
today in Nevada that feel quite strongly about mineral
education of our people and of our school children.
We sponsor in Nevada, teachers' workshops twice yearly, one
in the spring in Las Vegas and one in the summer in northern
Nevada. These are very well attended and very highly spoken of.
Again those are partnered with industry and the Nevada Mining
Association. We regularly go into the school classrooms. My
division alone does over 200 presentations during the course of
the school year, and everyone from our secretary/receptionist
to the administrator participates in those duties.
We feel very strongly about that mission and getting that
word out to the Nevada schoolchildren. And finally I think we
do need to realize that of the 1.8 million people in our State,
1.3 million live in Las Vegas and that, again, is a very unique
thing to Nevada. We do have a brand new growing population down
there that needs to hear that message and needs to understand
why mining is important to them, so we're very concerned about
that.
And we continue to push regularly and hard on that mineral
educational issue.
Mr. Gibbons. Finally, before I let you go--I know, I
promised you just two questions, but I can't let you go without
this one.
Do you see an area, any of you see an area, knowing the
present status of Nevada laws, where the Federal Government
needs to enact stricter laws that have been overlooked on your
behalf, or an area where you think the Federal Government
should step in to enact stricter laws because the State for
some reason may have failed or is unable to proceed in that
area?
Mr. Fields. No. I think the point that needs to be made to
the Federal Government is that the production of hard rock
minerals is an activity that requires closeness--I'm not sure
that's the right term, but close oversight from local and State
regulators, because of the unique character of different kinds
of mines, and conditions.
We have mines here in areas that produce 2 inches per year
of rainfall. Montana has mines in areas that produce 50 inches
of rainfall, and Alaska, much more. How can the Federal
Government come up with a one-size-fits-all type of regulation
to deal with the wide variety of mineral resources that we have
and the wide variety of climatic, geographic and economic
conditions that we have?
I think the current debate over the 3809 regulations is a
case in point. Nevada has developed a network, a system of
regulations that work very well for Nevada. Other states have
developed networks, systems of laws and regulations that work
very well for their conditions.
I think the role for Federal oversight is just that. It's
an oversight to make sure that broad public policy guidelines
are being met, but leave it to the local States actually to do
the regulation on them.
Mr. Gibbons. I'm not his straight man.
Mr. Coyner?
Mr. Coyner. Mr. Chairman, I would add something from one
small perspective, which is the State bond pool. The Division
of Minerals does administer that program for the State, which
helps the smaller and moderate-sized mining companies meet
their bonding obligations.
The track record of that bond pool has been one of no
forfeitures during the time of it's existence. So we have
demonstrated the State can respond on that level and manage
that actively and with satisfaction.
Another point I will make is that we have had several
companies in difficult times in the recent past year or two
with regard to finances and bankruptcy. The system, because of
the well-thought-out nature of it in Nevada, has responded to
those timely and with decision, and it's being managed in a
proper and appropriate way.
So, again, I think the evidence is the Nevada Model, if you
want to call it that, responds to various situations, is very
well designed and suits our State very well and good.
Thank you.
Mr. Gibbons. Mr. Parratt.
Mr. Parratt. I can only agree with what my counterparts at
the table have said. I think things are going quite well in
Nevada. I don't think we need any additional regulations on the
Federal side.
Mr. Gibbons. Well, gentlemen, thank you very much for your
time and testimony here today. It's been very helpful, and we
appreciate you being present today to help us better understand
Nevada, its mining industry, and the future in hand for where
we want to go.
With that, I'll go ahead and release this panel and call
the next panel up. I don't know if Assemblywoman Marcia de
Braga has made it to the room, but it will consist of Victoria
Soberinsky, the Deputy Chief of Staff for Governor Kenny Guinn;
Senator Dean Rhoads, we have also mentioned here earlier,
Chairman, Natural Resource Committee, Nevada State Legislature;
and Assemblywoman Marcia de Braga, Chairman of the Natural
Resources, Agriculture, and Mining Committee for the Assembly,
Nevada State Legislature.
Mr. Gibbons. Do we only have the two of you?
[Witnesses sworn.]
Mr. Gibbons. It's good to see you. Let me welcome both of
you to the panel today. I apologize for the delay. We
appreciate your time, your patience in waiting, and Mrs.
Soberinsky, the floor is yours.
STATEMENT OF VICTORIA SOBERINSKY, DEPUTY CHIEF OF STAFF FOR
GOVERNOR KENNY GUINN, STATE OF NEVADA
Ms. Soberinsky. Thank you very much, Mr. Chairman, and for
the record my name is Victoria Soberinsky, and I am the Deputy
Chief of Staff for Kenny Guinn in Nevada.
I appreciate the opportunity to testify today regarding the
effects of Federal mining fees and proposed Federal royalties
on State and local revenues and the mining industry.
Mining is an integral part of Nevada history and the Nevada
way of life. Nevada continues to be a world leader in gold
production and produces the most silver, magnesite and barite
in the Nation. Accordingly, Nevada has devoted a tremendous
amount of time and resources over the years to create and
maintain a strong and responsible mining industry.
I believe that Nevada is one of the most environmentally
responsible mining regions in the world; however, even with
Nevada's successes and proven track record, I believe Congress
and the State should continue to work with the industry and the
environmental community to continue to minimize mining effects
on the land and the other land users.
To be clear, the issues of reasonable Federal mining fees
and proposed Federal royalties are legitimate discussion
points. However, the impact from these proposed fees, royalties
and proposed Federal regulations on my State, our local
communities and the mining industry are equally important.
The industry is an important contributor to the Nation's
economy and my State's economy in particular. Nevada's mining
industry has created approximately 13,000 jobs directly related
to mining with an additional 45,000 jobs indirectly related to
the industry.
Generally speaking, these are high paying jobs that average
close to $50,000 per year. Rural Nevada communities, such as
Elko, Carlin, Battle Mountain, Winnemucca, Ely, Eureka and
Tonopah are all dependent on a vibrant mining industry.
As you contemplate proposed Federal fees and royalties and
have the opportunity to review proposed Federal regulations, I
hope you will keep in mind those communities and those families
who built a future around a responsible and environmentally
sensitive mining industry.
I'd like to make some brief remarks about the Department of
Interior's initiative to amend its land management, or 3809
regulations.
Nevada has closely monitored this initiative since the
Secretary of Interior directed the BLM to draft regulations in
January of 1997. Since that time there has been no real
justification offered by Interior regarding the need to make
changes.
Some people in groups have described our opposition to the
3809 revision as anti-environmental. I can assure you that
nothing can be further from the truth. Nevada has strong State
laws and regulations requiring reclamation of land disturbed by
mining.
Today, Nevada holds over $500 million in reclamation
sureties to ensure successful reclamation. My State has also
developed comprehensive regulations governing water quality
standards at mining operations. These requirements are working
well because the environmental community, mining industry, and
State and Federal regulators crafted them with a great deal of
cooperative effort.
Nevada's opposition to BLM's draft 3809 regulations is
based on the fact that our comments and input regarding this
action have largely been ignored.
I believe the current draft regulations are onerous,
unnecessarily burdensome and duplicative. In short, Interior is
attempting to move the responsibility for environmental
oversight of mining operations from Nevada and other western
States to Washington, DC.
Interior's efforts would clearly and significantly impact
Nevada's mining industry; but they will also adversely impact
Nevada's economy and our environment.
Nevada is the most arid State in the Nation. The condition
of public lands and the reliable quality and quantity of
Nevada's water resources are vitally important to our State.
Nevada has demonstrated it's eminently qualified to protect
these resources. Another level of Federal bureaucracy is simply
not necessary.
I believe reasonable mining fees and Federal royalties
would benefit all stake holders, including the States, Federal
Government, and industry. Proposed changes in mining fees
should end the $2.50 to $5 per acre patenting fee and replace
it with provisions to sell the patent for the surface land's
market value. This type of royalty would closely resemble the
State of Nevada's net proceeds system.
The administrative costs of our program are $250,000
annually, but the system has historically generated millions of
dollars on an annual basis.
Nevada would support these types of fee and royalty
proposals because they are fair. While these fees would clearly
increase costs in these difficult economic times, industry
could benefit because it would reduce some uncertainties and
risks associated with mining in the United States today.
The price of gold today is approximately $280 per ounce.
This very large variable has been the main force behind the
loss of nearly 1,000 jobs across Nevada in the last 2 years.
While commodity prices cannot be controlled, the need to
reduce other variables is evident. Nevada would support
improvements in the status quo in the areas of fees, royalties
and regulations, as long as they have a benefit and are
consistent with our goals and objectives, most notably to have
a strong, well-regulated, environmentally sound mining
industry.
Thank you very much, Mr. Chairman.
Mr. Gibbons. Thank you very much, Ms. Soberinsky.
[The prepared statement of Hon. Kenny C. Guinn follows:]
Statement of Hon. Kenny C. Guinn, Governor, State of Nevada
Mr. Chairman and members of the Subcommittee, I appreciate
the opportunity to testify today regarding the effects of
Federal mining fees and proposed Federal royalties on State and
local revenues and the mining industry. Mining is an integral
part of Nevada history and the Nevada way-of-life. Nevada
continues to be a world leader in gold production and produces
the most silver, magnesite and barite in the nation.
Accordingly, Nevada has devoted a tremendous amount of time and
resources over the years to create and maintain a strong and
responsible mining industry. I believe that Nevada is one of
the most environmentally responsible mining regions in the
world. However, even with Nevada's success and proven track
record, I believe Congress and the states should continue to
work with the industry and the environmental community to
continue to minimize mining effects on the land and the other
land users.
To be clear, the issues of reasonable Federal mining fees
and proposed Federal royalties are legitimate discussion
points. However, the impacts from these proposed fees,
royalties and proposed Federal regulations on my state, our
local communities and the mining industry are equally
important. The industry is an important contributor to the
nation's economy--and my state's economy in particular.
Nevada's mining industry has created approximately 13,000 jobs
directly related to mining, with an additional 45,000 jobs
indirectly related to the industry. Generally speaking these
are high paying jobs that average close to $50,000 per year.
Rural Nevada communities such as Elko, Carlin, Battle Mountain,
Winnemucca, Ely, Eureka and Tonopah are all dependent on a
vibrant mining industry. As you contemplate proposed Federal
fees and royalties and have the opportunity to review proposed
Federal regulations, I hope you will keep in mind those
communities and those families who built a future around a
responsible, environmentally sensitive mining industry.
I would like to make some brief remarks about the
Department of Interior's initiative to amend its land
management or 3809 regulations. Nevada has closely monitored
this initiative since the Secretary of Interior directed the
BLM to draft regulations in January 1997. Since that time,
there has been no real justification offered by Interior
regarding the need to make changes. Some people and groups have
described our opposition to the 3809 revisions as anti-
environmental. I can assure you that nothing can be further
from the truth. Nevada has strong state laws and regulations
requiring reclamation of lands disturbed by mining. Today,
Nevada holds over $500 million in reclamation sureties to
ensure successful reclamation. My state has also developed
comprehensive regulations governing water quality standards at
mining operations. These requirements are working well because
the environmental community, mining industry, and state and
Federal regulators crafted them with a great deal of
cooperative effort. Nevada's opposition to BLM's draft 3809
regulations is based on the fact that our comments and input
regarding this action have largely been ignored. I believe that
the current draft regulations are onerous, unnecessarily
burdensome and duplicative. In short, Interior is attempting to
move the responsibility for environmental oversight of mining
operations from Nevada and other Western states to Washington,
D.C. Interior's efforts would clearly and significantly impact
Nevada's mining industry, but they will also adversely impact
Nevada's economy and our environment, Nevada is the most arid
state in the Union. The condition of public lands and the
reliable quality and quantity of Nevada's water resources are
vitally important to our state. Nevada has demonstrated that it
is eminently qualified to protect these resources. Another
level of Federal bureaucracy is simply not necessary.
I believe reasonable mining fees and Federal royalties
would benefit all stakeholders including the states, Federal
Government and industry. Proposed changes in mining fees should
end the $2.50 to $5.00 per acre patenting fee and replace it
with provisions to sell the patent for the surface land's fair
market value. This type of royalty would closely resemble the
State of Nevada's net proceeds system, which has proven to be
highly effective. The administrative costs of our program are
$250,000 annually, but the system has historically generated
millions of dollars on an annual basis.
Nevada would support these types of fee and royalty
proposals, because they are fair. While these fees would
clearly increase costs in these difficult economic times,
industry could benefit because it would reduce some
uncertainties and risks associated with mining in the United
States today. The price of gold today is approximately $280 per
ounce. This very large variable has been the main force behind
the loss of nearly one thousand jobs across Nevada over the
last two years. While commodity prices can not be controlled,
the need to reduce other variables is evident. Nevada would
support improvements to the status quo in areas such as fees,
royalties and regulations as long as they have a benefit and
are consistent with our goals and objectives, most notably to
have a strong, well regulated, environmentally sound mining
industry. Thank you.
Mr. Gibbons. Senator Rhoads, welcome, and the floor is
yours.
STATEMENT OF DEAN A. RHOADS, CHAIRMAN, NATURAL RESOURCE
COMMITTEE, NEVADA STATE LEGISLATURE
Mr. Rhoads. Thank you.
Good afternoon, Mr. Chairman. I'm Dean Rhoads, Chairman of
the Nevada Senate Natural Resources Committee. I wondered
perhaps, when this hearing is over with, if you could do Dawn
and I a favor and lend us your light there for the legislature.
Mr. Gibbons. It is a wonderful thing.
Mr. Rhoads. We have 16 days left, and I'm sure if we had
that light there we could cut it down to 8.
Mr. Gibbons. I will see if I can send you a copy of it.
Mr. Rhoads. Mining is an industry, as you know, that I have
spent many years hearing about from your side of the table.
It's a pleasure to be here today, after four months of the
legislative session, to sit on the witness side to share with
you some of my observations I've collected for over the years.
As a rancher from Tuscarora, in the morning I could look
out and see the Independence Mine, and in the spring we'd drive
the cattle down through Barrick, Rodeo, Meickle and Newmont's
mine, and by the Digal mine and by Rossi Mine.
I've spent almost all my entire professional career working
near mining and learning about its effects on rural
communities. In 1977, when I was elected to the Nevada Assembly
I began considering mining from a policy perspective. My
experiences as a legislator have brought to life the
complexities of mining on a statewide level.
In 1985, I was appointed to the interim Public Lands
Committee, a committee which I've chaired since that time. I've
also been Chairman of the Natural Resources Committee since
1995.
While mining exists throughout Nevada, it's my Senate
District that is the most productive mining region in the
State, and arguably, the third most productive region in the
world. I represent Elko, Lander, Humboldt Counties and most of
Eureka County. The effects that mining has had on my District
over the years has been profoundly positive at times and very
poor at others due primarily to market fluctuations.
The simple fact is that the value of Nevada's primary
ores--gold, silver, and copper, are established on the open
market. Economic fluctuations, sometimes severe, are felt
throughout the rural communities that I represent.
These counties depend on tax revenues from the Net Proceeds
of Mines. Even with the current depressed market, Net Proceeds
of Mines constitutes between 20 percent to--in the case of
Eureka County--50 percent--of the rural counties' assessed
valuation. In contrast, net proceeds of Mines in Clark County
is only $8 million of the county's total $26 billion in
assessed valuation.
Additionally, there have been roughly 1,500 layoffs over
the past year, year and a half, throughout Nevada. Yet, these
laid-off workers come primarily from rural Nevada, representing
a rather significant percentage of the work force.
The fate of rural Nevada is not dire, thankfully. There are
signs of economic diversification, and ranching and tourism and
farming continue to contribute to the economy. Moreover,
Nevada's rural communities consist of survivors--people who
always keep their chins up and endure the tough times. And
there have been tough times.
Nonetheless, it's my district that must be remembered when
considering policies such as royalties and fees on mining. A
lot can be learned from studying the effects on our communities
by the recent drop in the price of gold--a factor that is out
of our control.
Parallels can certainly be drawn between the changing
market and changes in royalties and fees. Additional reductions
in mining revenue, even those that are seemingly small on
paper, will have weighty repercussions on the local businesses,
infrastructures, and families of rural Nevada.
I appreciate the Subcommittee's attention to these details,
and I thank you again for the opportunity to testify here today
on this most important issue. We thank you.
Mr. Gibbons. That light really works, doesn't it?
Mr. Rhoads. It sure does. Senator O'Neil would really like
that. I should grab it up for the last day of the session and
give it to him.
[The prepared statement of Mr. Rhoads follows:]
Statement of Dean A. Rhoads, a State Senator from the State of Nevada
Good afternoon Mr. Chairman and members of the
Subcommittee. I'm Dean Rhoads, Chairman of the Nevada Senate
Natural Resources Committee.
Mining is an industry that I have spent many years hearing
about from your side of the table. It is a pleasure to be here
today on the witness side to share with you some of the
observations I've collected over the years.
As a rancher from Tuscarora, Nevada, which is in the
northern-most part of the state, I have spent almost all of my
entire professional career working near mining and learning
about its effects on rural communities. In 1977, when I was
elected to the Nevada Assembly, I began considering mining from
a policy perspective. My experiences as a legislator have
brought to light the complexities of mining on a state-wide
level. In 1985, I was appointed to the interim Public Lands
Committee, a committee which I have Chaired since that time. I
have also been Chairman of the Senate Natural Resources
Committee since 1995.
While mining exists throughout Nevada, it is my Senate
district that is the most productive mining region in the
state, and arguably the third most productive region in the
world. I represent Elko, Lander, Humboldt and Pershing
Counties, and half of Eureka County.
The effects that mining has had on my district over the
years has been profoundly positive at times and very poor at
others due primarily to market fluctuations. The simple fact
that the value of Nevada's primary ores--gold, silver, and
copper--are established on the open market, economic
fluctuations--sometimes severe--are felt throughout the rural
communities that I represent.
These counties depend on tax revenues from the Net Proceeds
of Mines. Even with the current depressed market, Net Proceeds
of Mines constitutes between 20 percent to--in the case of
Eureka County--50 percent of the rural counties assessed
valuation. In contrast, Net Proceeds of Mines in Clark County
is only $8 million of the county's total $26 billion in
assessed valuation.
Additionally, there have been roughly 1,500 lay-offs over
the past year and a half throughout Nevada; yet, these laid-off
workers come primarily from rural Nevada, representing a
relatively significant percentage of the work force.
The fate of rural Nevada is not dire, thankfully. There are
signs of economic diversification, and ranching and farming
continue to contribute to the economy. Moreover, Nevada's rural
communities consist of survivors--people who always keep their
chins up and endure the tough times. And there have been tough
times.
Nonetheless, it is my district that must be remembered when
considering policies such as royalties and fees on mining. A
lot can be learned from studying the effects on our communities
by the recent drop in the price of gold--a factor that is out
of our control. Parallels can certainly be drawn between the
changing market and changes in royalties and fees. Additional
reductions in mining revenue, even those that are seemingly
small on paper, will have weighty repercussions on the local
businesses, infrastructures, and families of rural Nevada. I
appreciate the Subcommittee's attention to these details.
Thank you, again, for the opportunity to testify here today
on this important issue, which is critical to the livelihood of
rural Nevada.
Mr. Gibbons. Well, both of you, thank you for your time
here today, and Senator Rhoads, let me just begin with you
because you were mentioning about rural life, rural lifestyle
and impact. And there are some, but particularly the opposition
to the mining industry, who claim that the development of
tourism can replace the loss of the jobs in mining industry and
the economic base or other resource-dependent jobs in our rural
communities.
As a legislator from rural Nevada, can you comment on this
idea of where you see tourism supplanting the loss of jobs and
the quality of the lifestyle, where, as Ms. Soberinsky stated,
the average salary is about $50,000 for someone in the mining
industry?
Can you just give us your opinion and your perspective.
Mr. Rhoads. I think as a rural legislator, one of the big
issues in this session of the legislature is how are these
rural counties going to survive with their hospitals
deteriorating, with their schools--they do not have enough tax
base to generate any revenue. As far as any economic
development that would create tourism, they don't have enough
private land to put a decent tourism attraction on.
We're working in these last 2 weeks, addressing the rural
counties is going to be one of the major issues we come up
with; and I think for the first time in Nevada history, or at
least the first time since I have been in the Nevada
legislature--and that's 22 years--you're going to see the State
actually participate in some kind of funding mechanism to get
these rural counties back into decent financial shape.
And most of it has been caused, in a lot of the rural
counties, because of the declining mining industry, thanks to
the Federal Government. So that is a factor.
Mr. Gibbons. Well, I know, Senator Rhoads, because of your
action and your ideas, many of us in Congress, Senator Reid and
myself, have instituted what we call the Northern Nevada Public
Lands Bill, which we have introduced, which will sort of assist
some of these poor counties, both in their need to grow, need
to expand, in some of the communities, as well as a resource or
revenue source for some of these very important needs, like
education, health care and maintenance of highways, et cetera.
So I applaud you for your efforts in looking for those
solutions as well.
Ms. Soberinsky, for the record I read along with you in
your statement, and I do want to correct one thing: I believe
you stated, and maybe it was a misstatement, that the bonds
held by Nevada were $50 million. In your record of testimony
you said $500 million.
Which is correct? It's on page 2----
Ms. Soberinsky. Five hundred million, from my information.
Mr. Gibbons. Okay. And Ms. Soberinsky, the Department of
the Interior has maintained that their Draft Proposal 3809
regulations were developed in cooperation with the States.
Since Nevada may well be one of the most important mining
states in the Union, one would assume, of course, that they had
solicited a great deal of input from the State of Nevada; but
in your testimony, you have indicated otherwise.
How would you characterize the Interior Department's
efforts to seek the State of Nevada's input into their Draft
3809 regulations?
Ms. Soberinsky. Mr. Chairman, as you know, we're a new
administration, however I've spoken to various State agencies,
including Pete Morris at the Department of Conservation and
Natural Resources, and have been told that there was relatively
no solicitation from the Department of the Interior on our
concerns, Nevada's concerns in particular, but on the draft
regulations as a whole, and that our input was largely ignored
and not taken into consideration at all.
Mr. Gibbons. Now, would you mind submitting to the
Committee for the record, a record of or description of any
meetings, or your suggestions that came from the State of
Nevada with regard to the proposed 3809 regulations so that we
can incorporate that into this record?
Ms. Soberinsky. Absolutely. We would be happy to do that.
[The information follows:]
Mr. Gibbons. Let me explain for those of you in the
audience, the gentlemen that are sitting up here beside me are
not Congressmen. They are staff. Jack Victory from Fallon over
here is my legislative director and works with me in
Washington, DC.
John--I forgot your last name, I'm sorry----
Mr. Rishel. Rishel.
Mr. Gibbons. [continuing] Rishel, is the staff member from
the Committee. And Doug Fuller is the staff legal counsel for
the Resource Committee, and, of course, when I forget to do
something, they'll hand me a note. Let me say that for both of
you, maybe we can get one final question and then be pleased to
let you resume your busy lives.
If I were to go back to Congress and give them one
statement or summary about Nevada mining, what should I tell
them?
Ms. Soberinsky. This is actually--I was going to add on to
Senator Rhoads' comments earlier when you had asked about
tourism replacing the mining industry. I'd say most
importantly, I think sometimes what the Federal Government
forgets is that the mining industry and the people that make up
the mining industry are integral parts of the communities that
they live in.
They are the first ones there with scholarships when
needed; they're the first ones there when there is a health
care crises. They are the first ones there when there is a
family in their community that needs something.
They are not just this monolithic industry that mines gold
out of the ground and takes all its profits and runs. They
significantly contribute to the livelihood of each of those
communities, and I think that that is something that the
Federal Government needs to take into consideration in dealing
with this issue.
Mr. Gibbons. I'm not her straight man.
Mr. Rhoads. I would say, Congressman, that we should tell
them that the people that are the closest to the ground are the
ones that can make the wisest decisions, and we live there and
we're going to come back there. And we're going to take care of
that ground much better than somebody from Maryland or
Pennsylvania, or Arkansas. I have been telling them that for 25
years back there, and sometimes we gain a little, and a lot of
times we lose, but thanks to Congressmen like you and others, I
think that there's a little bit of light at the end of the
tunnel now and we might be getting our voices heard, so we
appreciate that.
Mr. Gibbons. Well, thank you. We're happy to have both of
you here today. Thank you for your very helpful testimony.
Again, we'll excuse you, and appreciate your follow-up with
any additional testimony or documentation that you have.
With that, let me call our third panel up, Glenn Miller,
Cochair Mining Committee, Toiyabe Chapter, Sierra Club, Reno,
Nevada; Tom Myers, Director, Great Basin Mine Watch, Reno,
Nevada; Leo Drozdoff, Chief, Bureau of Mining Regulation and
Reclamation, Nevada Division of Environmental Protection,
Carson City, Nevada.
Gentlemen.
[Witnesses sworn.]
Mr. Gibbons. Welcome to each of you. As you have heard,
your full written testimony will be submitted for the record.
You're free to paraphrase and summarize in any way you see fit.
The lights will come on for you, each one, to give you a
certain time frame within which to discuss your points.
Mr. Gibbons. With that, Professor Miller, we'll turn to you
first.
STATEMENT OF GLENN C. MILLER, COCHAIR, MINING COMMITTEE,
TOIYABE CHAPTER, SIERRA CLUB, RENO, NEVADA
Mr. Miller. Thank you. I appreciate the opportunity to make
some brief comments, and I appreciate your willingness to hold
this hearing.
I think all the speakers before us have made the comment,
which is very true that the industry is very much depressed
right now because of a severe depression in gold prices.
When gold was up at $400 an ounce, I think everybody was
happier. It's a lot easier to talk to industry when they have a
lot of money, about environmental issues, and it's more
difficult when they don't have as much profit margin present.
But the issues that I guess I'd like to make is that even
though the depression is there in prices, and profitability is
not there, the environmental, risk of the environmental costs
remain about the same, and I am very concerned that the funds
to insure that the mines are mining in an environmentally
responsible manner be retained.
There is an issue of bankruptcies in Nevada. Now, the
numbers, I'm not completely sure about. They change on a fairly
frequent basis, but there are over 13 mining sites that have
gone into bankruptcy in recent years, and some of these
operations are major ones.
The Arimetco's Paradise Peak and the Yerington copper mine.
Those are ones where the bonding was severely problematic. Part
of it was a corporate bond that is no longer, at least,
accessible at present. Pegasus' large mine, Florida Canyon; and
Alta Gold is now in bankruptcy. They may come out of
bankruptcy; but they have Olinghouse mine just above the
Pyramid Lake reservation, plus two other mines in Nevada.
While bonds are available for these mines under Nevada
regulations--I was involved in establishing both the
legislation that established reclamation law, which, although
it was debated very highly in 1989--I remember having shouting
matches in the legislature, during that time--whether that was
a consensus process, I don't know, but the way legislation
goes, it did move forward.
That, we agreed would not bond for fluid costs. Now,
probably I think one of the largest emerging problems from
mining and environmental issues have to do with how to handle
fluids that come out of the waste rock dumps, fluids that come
out of heaps, and pit lakes.
There is no authority, and in fact there is specifically an
inability to bond for those specific units on major mines. And
those are probably some of the largest environmental problems
with largest costs that ultimately may be incurred.
One of the mines, Paradise Peak, half of the bond was held
as a corporate guarantee, may come back but it's problematic.
We have to get in line with other of the debtors from that
mine.
This now has a tailings impoundment that you can see when
it blows, like it has blown for the last few days, you can see
it from 10 miles away, the tailings impoundment dust, or dust
which causes--pretty reactive materials can be seen 10 miles
away. It has a pit lake that the last time I saw any gauge on
it, was going sour, going acidic, there was a tremendous amount
of physical risk from that site also because of the very high
instability in the wall rock.
Who's going to pay for this? I mean, this is not a trickle
cost. This will be many millions of dollars. And I guess that I
would argue that a royalty fee, should it be established,
should be dedicated to paying for those mines that go under
that are not sufficiently bonded.
Three quick points here: I want to provide a brief overview
of three generic problems that are becoming increasingly
prevalent in Nevada.
Pit lakes: In the next 30 years, there will very likely be
more water in pit lakes than all the other man made reservoirs
in Nevada, excluding, of course, Lake Mead. And I don't think
anyone argues that point at all.
It's also my belief that the water quality in these pit
lakes will not meet the majority of uses that include
agricultural, either irrigation or stock watering, certainly
not domestic water quality uses, so that water that will be in
those pit lakes will largely be unavailable for ranching, for
agriculture or for domestic use.
At least one of the pit lakes in Nevada contains
constituents that are really severely problematic to wildlife.
The two largest man-made lakes in Nevada will be pit lakes and
will contain a total of 1 million acre feet of water.
It's a long term commitment that we are doing right now.
We're committing long term resources for the future.
The second one is discharge from precious metals heaps.
This an issue I don't think anybody felt would be a major
problem. It's now becoming apparent that a large number of
heaps in Nevada will drain following snow and rain infiltration
and this will be over many, many decades.
Even if you get one furlong of water through a pit, through
a heap, with the rainfall in it Nevada will require on the
order of 20, 30, 40 and beyond decades. So it's a problem that
is effectively permanent, and how we a handle that water is not
clear at all.
I think Leo Drozdoff may have some comments about that.
Finally, discharge from waste rock dumps: As in other
States, drainage from waste rock dumps is a problem. A
problematic mine is the Big Springs Mine, which was a model
mine. I appeared on a video in support that mine. Now it has
sulfate concentrations coming up; some pH declines that are
very slight, with some indication that may be becoming an acid
site. At the very least, it's causing significant problems for
the north fork of the Humboldt.
Somebody is going to pay for this. Somebody is going to
pay. Right now the BLM is getting funds out of appropriations
to pay--for some of this, so it's either going to be the
taxpayers, or I would argue that a good burden of that should
be on the industry that has and will continue to gain a profit
from those activities. Thank you.
Mr. Gibbons. Thank you.
[The prepared statement of Mr. Miller follows:]
Statement of Glenn C. Miller, Co-Chair of the Mining Committee of the
Toiyabe Chapter of the Sierra Club
My name is Glenn C. Miller, and I reside at 581 Creighton Way, Reno
NV. I have been active in the Toiyabe Chapter of the Sierra Club for
over 20 years on the subject of mining on public lands. I have observed
the mining industry in Nevada grow nearly ten-fold during that time,
from less than $400 million per year in 1980 to over $3 billion in
1997. This industry has undergone dramatic changes during that time,
and I have followed the development of new state and Federal
regulations, and observed changes in the mining industry in their
response to regulations.
In many ways, gold mining in Nevada is less expensive and offers
better operational characteristics than are present in other states
that have higher rainfall. These features, as well as a friendly
regulatory attitude towards mining, have allowed Nevada to become the
nation's largest producer of gold and silver. When gold was near $400
per ounce, the industry was very profitable; at $280 per ounce, the
industry is severely stressed, except perhaps for the very lowest cost
producers. Even in these times of financial stress, the environment
still requires just as much protection as when the mining industry was
much more profitable. Protecting the environment requires sufficient
funding to plan, permit, regulate and close these mines. To reduce
funding now when mine closure is becoming an increasing concern is very
short sighted.
I wish to make four simple points regarding the fees charged for
mining claims and a potential royalty, which would help to pay for some
of the costs associated with mining.
1. Even though the profitability of mining may have decreased, the
costs for regulating mining remain, and may be increasing due to the
increased need for careful regulation during closure of mines. The gold
mining boom that began in the early 1980's utilized new techniques for
mining. This very large-scale mining has created new environmental
issues that have not previously been considered and closure problems
are now becoming apparent. These issues are discussed below. At any
rate, the need for increased funding for the Federal and state
regulatory agencies is apparent. Unless this funding comes from the
mining industry, it will probably need to come from the general fund.
Thus, retention of Federal and state fees on claims is critically
important to retain, as are the current permit fees required by the
State of Nevada.
2. Bankruptcies of mining companies are becoming a common
occurrence in Nevada. Companies which operated or owned over 13 mining
sites have gone into bankruptcy in recent years in Nevada. Some of
those operations are major mines, including Arimetco (Paradise Peak and
the Yerington copper mine), Pegasus (Florida Canyon) and Alta Gold
(Olinghouse mine and two other mines in Nevada). While bonds are
available for many of these mines, they are not generally bonded for
management of fluids which are released following closure of heaps, or
long-term management of pit lakes, when they occur. For one of the
mines, (Paradise Peak) half of the bond was held as a corporate
guarantee, which is problematic, to say the least when the net worth of
the company is less than the debt. This mine now has a pit lake that
may be turning acidic, a tailings impoundment that blows tailings dust
miles away and heaps that are not closed properly. Who has the
responsibility of protecting the public from long-term costs of
remediation? Those costs are likely to range in the millions of
dollars, or if left alone will provide long-term physical and chemical
risks to the public and wildlife.
3. If a royalty is established, I urge that those funds be used to
partially offset the costs the public will incur for management and
remediation of mines on public lands. I am convinced that those costs
will be substantial and doubt that any royalty will be sufficient for
the public costs that are being incurred with present mines today.
However, it will help.
4. Finally, I want to provide a brief overview of three generic
problems that are becoming increasingly prevalent in Nevada:
Creation of pit lakes: Within the next 30 years, there
is very likely to be more water in pit lakes than all the other
man-made lakes completely in Nevada. It is also my belief that
the water quality in the majority of those pit lakes will be
sufficiently poor that it will be degraded for domestic use,
irrigation, and stock watering. Some of the pit lakes presently
in Nevada exceed standards for protection of wildlife. The two
largest man-made lakes in Nevada will be pit lakes and contain
a total of over 1 million acre-feet of water. This is a
tremendous long-term commitment of the limiting resource in
Nevada.
Discharge from precious metals heaps. It is now
becoming apparent that a large number of heaps in Nevada will
drain following snow and rain infiltration. Based on research
my laboratory has conducted at the University of Nevada, this
water will be contaminated for many decades. We do not have
firm plans for management of that water, other than to simply
allow it to drain into the subsurface environment. In fact,
this option is the regulatory fix which is being permitted by
the State of Nevada, even on federally managed public lands.
Drainage from waste rock dumps. Just as in other
states, drainage from waste rock dumps is a problem. While
acidic drainage was not thought to be a substantial problem in
the current gold mining areas, we now have several sites where
acids are being generated. One of those sites, the Big Springs
Mine was considered a model mine in the early 1990's. By 1992,
the sulfate concentrations began to increase from drainage from
waste rock dumps, and a serious decrease in pH of the drainage
water is now an apparent trend. Waste rock dumps at other sites
are also releasing contaminants loads that did not exist prior
to mining.
These problems are now occurring when the industry is very
stressed. The problems will not simply go away, and many of them will
continue to increase as the larger mines close. Rather than consider
reducing fees, the Congress needs to recognize that someone has to pay
the piper. Those costs will be paid either by the industry that gained
the wealth from the activity, or it will be the public who will bear
the cost in money or resource loss if they are not fixed.
Thanks for the opportunity to provide these comments.
Mr. Gibbons. Dr. Myers.
STATEMENT OF TOM MYERS, DIRECTOR, GREAT BASIN MINE WATCH, RENO,
NEVADA
Mr. Myers. Thank you. Mr. Chairman, my name is Tom Myers, I
am a Director of the Nevada-based environmental advocacy group,
Great Basin Mine Watch. Thank you for this opportunity to
testify on the issue of immediate concern to members of our
group and the State of Nevada, and thank you for holding this
hearing.
And the light is still red right now. I'd hate to be
eliminated after my first paragraph.
Mr. Gibbons. It'll just give you that much more time.
Mr. Myers. Thank you. As requested, I will address two
subjects: Federal holding fees such as the claim maintenance
fee, and royalty payments.
As part of the 1993 appropriations bill, Congress allowed
the BLM to start collecting $100 year per claim fee on mining
claims as part of their appropriations. This has been renewed
twice with an additional $25 location fee added in 1995.
Fees collected have ranged from $30- to $36 million dollars
between 1995 and 1998 with the majority going to the BLM's
Mining Law administration Budget. If this Committee proposes
elimination of the fee, the administration of the program must
financed from general revenues.
Who could oppose this fee? The amount is a mere blip on the
annual budget of large companies. For those holding a claim
block until the market improves, the fee frees them from doing
expensive and environmentally damaging maintenance work.
The small miner exemption eliminates the fee as an issue
for honest, small-scale miners and exploration companies.
The only people really hurt by this holding fee are
speculators. These are people who stake multiple claims in a
minerals-rich area in hopes of mining the legitimate mining
companies who would rather buy out a claim than challenge it's
validity.
You have received testimony today that these fees have
decreased the exploration activity in Nevada. We respectfully
disagree with the opinion that this is a problem. In 1993, the
number of registered claims dropped from 258,000 to 126,000,
while nationally, claims dropped from 760,000 to 294,000.
Coincident, statistically insignificant drops in
exploration are due to the price of gold. Any increase in
exploration in foreign countries merely reflects the fact that
Nevada has been explored for 125 years.
The overseas areas, such as Russia, are virgin territory.
Regarding royalties, Great Basin Mine Watch supports an 8
percent net smelter royalty, which is in the low end of the 5
to 15 percent range currently charged by states on their lands.
My written testimony includes calculations that prove that at
least 80 percent of operations will remain profitable with such
a royalty even if gold prices drop to $250 per ounce.
Based on an operating cost of $212 per ounce, the effective
royalty rate after tax deductions and depletion allowances are
considered, is only 5.48 percent.
But a longer-term look reveals much more about the industry
and production. Between 1987 and 1992 the real price of gold
fell by $220 per ounce. During that time period of precipitous
price declines, gold production boomed increasing 128 percent.
An industry that can boom amidst price declines that are 15
times the likely effective size of a Federal royalty is
unlikely to be crippled by that royalty.
More importantly, the industry has adjusted to changing
prices by decreasing their costs substantially with time. The
preferred method of decreasing costs is to discover and produce
higher quality ore. Unfortunately for the worker and for
Nevada's economy, production costs are often lowered by more
efficient processing which usually means more mechanization and
less labor.
I expect that as the industry expands, more gold will be
produced with less labor, just as in the timber industry.
The impact of the Federal royalty will likely be about a 2
percent reduction in total production and employment, which
represents about a day's worth of not normal job growth in the
West. Only 1 in 1,000 western jobs are in metal mining and only
1 in 6 of those jobs rely on Federal land. Therefore, royalty
payments have a potential to effect a tiny sliver, about 3 of
every 10,000 of total western jobs in the mining industry.
This is not to make light of the concern of local
communities in eastern Nevada who do depend to a substantial
degree on minerals production. However, the answer is not
continued corporate welfare or subsidies. The answer is more
diversification of the local economies.
Great Basin Mining Watch recommends that royalties be used
for abandoned mine reclamation. Production in Nevada alone, 143
thousand--excuse me--$143 million per year. Nevada looses a
huge economic opportunity because the Federal Government does
not charge royalties that are applied to abandoned mine clean
up.
Federal royalties could also solve potential problems that
Glenn referred to a minute ago with things like bankruptcies,
corporate bonding, and a few other problems. In conclusion, I
want to reiterate that the fastest growing rural western
regions are places where people want to live because of their
beauty, not because of what they extract from the earth. Thank
you very much.
[The prepared statement of Mr. Myers follows:]
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Mr. Gibbons. Look at that. It's still green.
Mr. Drozdoff.
STATEMENT OF LEO M. DROZDOFF, CHIEF, BUREAU OF MINING
REGULATION AND RECLAMATION, NEVADA DIVISION OF ENVIRONMENTAL
PROTECTION, CARSON CITY, NEVADA
Mr. Drozdoff. Thank you Mr. Chairman. My name is Leo
Drozdoff and I'm the Mining Office Bureau Chief of the Nevada
Division of Environmental Protection. The Nevada Division of
Environmental Protection of the Nevada Department of
Conservation and Natural Resources appreciates the opportunity
to provide testimony to the Committee on Resources,
Subcommittee on Energy and Mineral Resources.
Since you have requested testimony on the effect of Federal
mining fees and proposed Federal royalties on State and local
revenues and the mining industry, we will provide the
Subcommittee with some background pertaining to Nevada's well-
run mining regulatory programs.
I will probably also touch on a couple of points Doctor
Miller talked about as well. The NDEP is only one of several
State agencies that regulate mining operations in Nevada. The
Mining Bureau of NDEP is charged with ensuring that the quality
of Nevada's water resources are not degraded as a result of
mining operations and provide that the land is properly
reclaimed and returned to a productive post mining land use.
Other bureaus within NDEP are charged with protecting
Nevada's air quality and insuring that solid waste at mining
operations is handled appropriately.
Generally speaking, the prevailing instrument that the NDEP
uses to regulate activities on mine sites is the operating
permit. The cost to obtain these permits, that is, air, water,
reclamation, et cetera, may range from $100,000 for a mid-sized
facility to several million dollars for a large operation with
sensitive environmental issues.
The annual cost associated with these permits, that is, the
fees paid to support the State regulatory programs, can range
from $20,000 to $70,000 a year, or probably more.
For example, NDEP's entire Mining Bureau operating budget
of $2 million is completely supported by fees paid by the
industry. NDEP's Mining Bureau does not receive any State
general fund or Federal monies. The monitoring costs that
ensure that a mining facility remains in compliance with their
operation permits routinely exceeds $100,000 per year.
And lastly, the State of Nevada holds, or jointly holds
with Federal land managers, over $500 million in reclamation
sureties. These costs don't include construction costs
necessary to meet environmental requirements. In addition,
costs from other State and Federal programs, most notably, NEPA
requirements, rival and can dwarf the costs associated with the
NDEP's programs.
Our reason for summarizing these programs is to neither
boast nor apologize, but rather to underscore the states
priorities. With these costs, this State realizes tangible
benefits, most notably a well-regulated mining industry, and a
protected environment.
Currently there are literally dozens of new regulations on
the horizon which can not only negatively impact the mining
industry, but also Nevada's ability to regulate mining
activity.
It's our hope that when Congress has the opportunity to
review new regulations or fees, it will ascertain whether these
proposals add value and benefit like we believe Nevada's
already do.
I would like to just make you aware that some of the
environmental issues raised by Dr. Miller, my fellow panel
member, are certainly legitimate discussion points.
I guess to stay on point I will summarize them generally
and be glad to answer specific questions, but from my
perspective the NDEP is equipped to address these issues, and
more importantly, we are effectively addressing these issues.
The State program is a dynamic program. We're clearly in a
changing environment and we're contemplating some changes to
our environmental programs, but that's the beauty of the State
program, that it has the ability to do that.
So with that, I would be happy to answer any questions that
you have.
Mr. Gibbons. Mr. Drozdoff, thank you very much for your
very helpful testimony.
[The prepared statement of Mr. Drozdoff follows:]
Statement of Leo M. Drozdoff, P.E., Bureau Chief, Mining Regulation and
Reclamation, State of Nevada, Department of Conservation and Natural
Resources, Nevada Division of Environmental Protection
Mr. Chairman and members of the Subcommittee, the Nevada
Division of Environmental Protection (NDEP) of the Nevada
Department of Conservation and Natural Resources appreciates
the opportunity to provide testimony to the Committee on
Resources, Subcommittee on Energy and Mineral Resources. Since
you have requested testimony on the ``effect of Federal mining
fees and proposed Federal royalties on state and local revenues
and the mining industry,'' we will provide the Subcommittee
with some background pertaining to Nevada's well run mining
regulatory programs. The NDEP is only one of several state
agencies that regulate mining operations in Nevada. The Mining
Bureau of NDEP is charged with ensuring that the quality of
Nevada's water resources are not degraded as a result of mining
operations and provide that the land is properly reclaimed and
returned to a productive post mining land use. Other bureaus
within NDEP are charged with protecting Nevada's air quality
and ensuring that solid waste at mining operations is handled
appropriately.
Generally speaking, the prevailing instrument the NDEP uses
to regulate activities on mine sites is the operating permit.
The costs to obtain these permits (air, water, reclamation,
etc.) may range from one hundred thousand dollars for a mid-
sized facility to several million dollars for a large operation
with sensitive environmental issues. The annual costs
associated with these permits, that is, the fees paid to
support the state regulatory programs can range from $20,000-
$70,000 per year or more. For example, NDEP's entire Mining
Bureau operating budget of $2 million is completely supported
by fees. NDEP's Mining Bureau does not receive any state
general fund or Federal monies. The monitoring costs that
ensure that a mining facility remains in compliance with their
operating permits routinely exceed $100,000 per year. Lastly,
the State of Nevada holds or jointly holds with Federal land
managers, over $500 million in reclamation sureties. These
costs certainly don't include construction costs necessary to
meet environmental requirements. Additionally, costs from other
state and Federal programs, most notably NEPA requirments,
rival and can dwarf the costs associated with the NDEP's
programs.
Our reason for summarizing these programs is to neither
boast nor apologize, but rather to underscore the State's
priorities. With these costs, the State realizes tangible
benefits--most notably a well regulated mining industry and a
protected environment. Currently, there are literally dozens of
new regulations on the horizon, which can negatively impact not
only the mining industry, but also Nevada's ability to regulate
mining activities. It is our hope that when Congress has the
opportunity to review new regulations or fees it will ascertain
whether these proposals add value and benefit like Nevada's
already do.
I would be happy to answer any questions you may have.
Thank you.
Mr. Gibbons. Let me start with Dr. Miller, if I may.
You talked about the need for a royalty to take care of the
environmental problems that have been or are currently
existing, or may exist in the future. Dr. Miller, is it your
position that the Federal Government under a Federal royalty
could do a better job than if we had a State royalty to take
care of the very the same thing?
Mr. Miller. Yes. Either way. I mean I have no--I think on
publicly-owned land, there is a responsibility that those land
management agencies, that they answer to the public. It is
public lands. I think there needs to be a substantial
involvement in that discussion, exactly how that reclamation or
damage reduction occurs.
But you know, I have no particular--you know, money is
money. Whether--but I have yet to hear of the State of Nevada
suggesting that there should be a royalty for reclamation. The
money, the net proceeds, which has declined considerably in the
last year, 1997-1998, I don't think there has ever been a
discussion of utilizing that to reclaim lands that are damaged.
I was out at Pyramid Lake yesterday and there is a site
there that is from historic mining, I believe a copper site,
tremendously acid generating, that is--on an ephemeral basis,
during high runoff, does flow into Pyramid Lake. That's
something that nobody has any money to pay for, certainly not--
it's on reservation property.
It's one of the issues that the BLM in their abandoned
mining lands program is looking at fixing, but that's the kind
of issue that is an historic issue.
Then I believe there is all these other things that are
being created now that we don't know about that we'll know
about 20 or 30 years from now. There should be some money
somewhere to pay for those. And I believe that is an industry
responsibility because it's the industry that created the
wealth that went--you know, I am a great supporter of wealth
creation. There is a lot of money that's made, profits made.
And some of that needs to stay somewhere in order to correct
those problems that are being created and have been created in
the past years.
Mr. Gibbons. Dr. Miller, We're all aware of the Superfund,
a Federal program to clean up hazardous sites around this
country.
Mr. Miller. Yes.
Mr. Gibbons. A very, very, lucrative fund which has gone
almost totally unapplied to the things it was supposed to do.
Instead it goes to court battles filling the pockets of lawyers
rather than cleaning up sites.
Mr. Miller. No argument there.
Mr. Gibbons. So I guess my point is, would you believe that
a one-size-fits-all Superfund type, that is paid mostly out of
Nevada since we're the largest metal-producing State in the
country, would be the way to do this, or should it be
individualized, because problems, as you heard earlier, are
local to Nevada that aren't local to Montana, that aren't local
to Utah or Arizona?
Mr. Miller. Congressman, you're in the Nevada Legislature.
The chances of getting a royalty passed in Nevada on mining, I
think you have a better idea of exactly what the chances of
that would be.
They are not very high, and I guess my suggestion is I
don't care where the money comes from. But it should come from
somewhere. I don't think Nevada politically would ever pass a
royalty to fix abandoned mine damage in this State--and if you
believe they would, I would appreciate you asking the
legislature if they would, because you know, I think you have
quite a bit of influence on that issue.
Mr. Gibbons. Let me say that we heard, also, testimony--and
not to argue with you, because I don't intend to do that, but
we have 1.3 million people in Las Vegas, and I don't know of
too many mines in Las Vegas, and the majority of the members of
our legislature come from Las Vegas, who have a deep abiding
interest in the welfare of not just Las Vegas, but all of
Nevada.
I would think as the face of Nevada changes, so might the
political will of this State. I think it's very onerous to
suggest that those people in Nevada should pay for damage that
is done in Utah.
Mr. Miller. Absolutely not. I agree with that. I agree with
that.
Mr. Gibbons. Mr. Myers, I have looked at your testimony--
excuse me, Dr. Myers, if you prefer--I looked at your
testimony, and your royalty analysis on page five, that's here,
in your written testimony, is based on heap leach gold as I see
it. Is that correct?
Mr. Myers. Yes, it is. It's based--the calculations in
there are based on a table from a Congressional Research
Services paper of several years ago.
Mr. Gibbons. So did you take into consideration other metal
mining operations and milling costs, or copper and zinc in your
calculations there?
Mr. Myers. No, not at all. I mean, I could have hundreds of
permutations of that calculation. What I tried to do is similar
to what the author of that report did, for copper--I believe
his example was copper--is I tried to come up with a variety of
examples and using the 1997 average cost of production, or 212,
which I think--$212.
Mr. Gibbons. On page 8 of your testimony, you state that
``production''--I presume gold, because it's not qualified in
there--``will yield about $143 million per year.'' Presumably
that's with an 8 percent net smelter royalty payments to the
Federal Government?
Mr. Myers. Correct.
Mr. Gibbons. That's the basis of your statement?
Mr. Myers. That's correct.
Mr. Gibbons. I can't see how you derive that estimate of
$143 million, because according to the information that I
have--and maybe you can help us understand better--about 32
percent or 2-\1/2\ million ounces of gold is produced from
public lands----
Mr. Myers. Do I have----
Mr. Gibbons. [continuing] Each year, so if I may, going
back to page 5 of your testimony, the 8 percent net smelter
return on that ranges from 20 percent at $250 per ounce gold,
to $28--excuse me that would be $20 per ounce for $250 gold;
$28 per ounce for $350 per ounce gold. This equates, in my
calculations, to a total royalty to the Federal Government of
about $50.2 million at $250 per ounce and/or 70.4 million at
the $350.00 level. I'm just curious: At what point did you
assume the price of gold to get to $143 million?
Mr. Myers. Well, the $143 million was not my calculation.
It was a quote from another report, which I see I did not
footnote, but it was from the draft report that came from--that
is referenced in number 16.
Mr. Gibbons. So would you submit a corrected version of
your testimony based on those questions, so we don't have to
put this misrepresentation into the record for us, Doctor?
Mr. Myers. I'd disagree that there is a misrepresentation
in the calculations that I provided you on page 5, but I can
change $143 back to $143 million, if you'd like. Is that what
you are asking me to change?
Mr. Gibbons. Precisely, because you've submitted this
document and your testimony as being the truth, and I want to
be sure we have the facts, the truthful facts as they come out,
and I don't want to associate you with a misstatement that
might somehow become problematic or difficult later on, Doctor.
So let's go back to your table on page 5.
Mr. Myers. Okay.
Mr. Gibbons. I don't see any provision in this table for
capital costs in your table, and in 1997, according to my
information, the average gold mining costs in the United States
were $287 per ounce or about $75 higher than operation costs?
Mr. Myers. I do have a line there for depreciation which is
depreciation on capital. That number comes as sort of a
guesstimate of the knowledge very similar to the table that was
in the Congressional Research Service report where they----
Mr. Gibbons. Your depreciation in that, though, is $10 per
ounce.
Mr. Myers. Depreciation is--okay. It was not based on a per
ounce amount. It was based on, say, $100 million capital
investment depreciated over a 10-year period, or something like
that.
I'm not an expert on depreciation. The number that was used
there came from the Congressional Research Service report that
I used.
Mr. Gibbons. So what--Where do you get the other $65 that
you assess in there?
Mr. Myers. I'm sorry. Which other $65 are you referring to?
We go from--we go from a gross revenue through smelting costs
and transportation. The smelting costs are very minimal
according to John Dobra, so I'm quoting from him in that
particular number. Then it comes down to net smelter returns;
then I applied an 8 percent royalty to that to come up with the
gross mining income. Then operation costs were based on $212
per ounce. I came up with net operating income. I subtracted a
guessed-at amount for depreciation, just, as I say, for
example, and we go down to a pre-depletion income; and I used
the same depletion amount as used by the CRS report, and came
up with pre-tax profit of a certain amount; and I applied taxes
to it and came up with a net profit.
Mr. Gibbons. Okay. Well, according to my mathematics--While
I don't have a Ph.D in economics, accounting, or mathematics,
and I know you can help me out, but when I look at this I see
$287 is your total cost less operating costs of $212; $75 is
assessed as other costs; and only $10 for depreciation in
there. I just need you to tell me how you account for the
additional cost of $65 per ounce in your testimony.
Mr. Myers. I'm not sure where the $287 you just mentioned
comes from. I'm sorry I don't see it in my table.
Mr. Gibbons. Looking back through there, according to your
reference here, Dobra, J.L. 1999, giving you $212 per ounce;
there is also a reference in there for $287 per ounce for gold.
Mr. Myers. For the operating cost?
Mr. Gibbons. No, no, that's the total cost.
Mr. Myers. In Dobra's----
Mr. Gibbons. Dobra's, the document you referenced here as--
--
Mr. Myers. Right.
I've referenced the chart in Dobra's 1998 report, and he
also predicts that in 1998 the price will be $190 per ounce.
Mr. Gibbons. I just would ask you, for the record, if you
would mind submitting a recalculated table and figures for us
so that we have the correct information to go forward with,
because it's a bit uncertain here, Doctor. That's all I'm
trying to do is not put you on the spot, I'd just like to
clarify some questions that I have.
Mr. Myers. Well, I need to know which number you'd like me
to change in the calculation, because every number in this
table is correct.
Mr. Gibbons. Well, yeah, well, just for the record,
reconcile the total cost.
Mr. Myers. It appears from the difference in the figures,
because if you look on figure--if you look on figure 5, he
talks about 1997 average total cash cost of $199. On figure 4
he talks about an average total cash cost of $212 per ounce.
I see an awful lot of different numbers that Dr. Dobra is
using here. I believe the one in figure 6 that you're referring
to, the 287, includes some capital costs that would not be a
part of the net smelter returns calculation that I'm using, nor
what the CRS report that I was using referred to.
So I'm using the number--the 212 is as close to the number
for the example that I was trying to use.
Mr. Gibbons. Doctor, I'm not an economist, nor am I an
accountant, and I know the original question started off with
the provisions you may have submitted for capital costs in your
testimony, and capital costs seem to be, overall, a part of
operating costs of the mine.
Mr. Myers. The only thing I submitted on capital costs is
the depreciation value which is a really guessed-at number,
because there is no average capital cost that I was able to
obtain.
Mr. Gibbons. Well, Mr. Drozdoff--Is that how I pronounce
your name? Am I doing it correctly?
Mr. Drozdoff. Yes, that's correct. Thank you.
Mr. Gibbons. The witnesses on your panel have alluded to 13
mine bankruptcies in Nevada that have caused reclamation
problems. Are these mines major? And could you comment on the
bankruptcy issue and try to quantify for the Committee, what,
if any associated reclamation or other environmental problems
exist due to that bankruptcy?
Mr. Drozdoff. Yes, I would be glad to. For the record, the
NDEP does not use the term ``major'' to classify a mine. So any
answer I give you is sort of just a feel.
I would probably agree with Dr. Miller in terms of the
major mines that he mentioned, I'd say Florida Canyon, which
was previously owned by Pegasus and is now owned by Apollo
Gold, that would clearly constitute a major mine.
I think any of the other ones after that can run in scale
from small to moderate size. Now, in terms of the tangible
issues associated with bankruptcy, I would like to take a
couple moments to get into that.
Currently, as we sit here today, there are two facilities
that were in bankruptcy that are being actively reclaimed with
either our oversight or in the case of one facility, simply a
government contract.
Mr. Gibbons. Which two are those?
Mr. Drozdoff. That would be the Goldfield Mine south of
Tonopah and the Mt. Hamilton Mine west of Ely. In the case of
the Goldfield Mine, we began working with the bonding company
and began reclamation work last year. I am happy to report that
we're already working through some bond release for work
completed at that facility.
In the case of Mt. Hamilton, we worked with the United
States Forest Service, and in that case the bonding company
surrendered it's bond, and we negotiated a contract with a
third-party contractor in April, and work is proceeding.
So to characterize--the seminal issue with bankruptcies,
is, as you know, they take a while. And that's unfortunate, but
I can assure you that we're involved in that process, and if we
need to do something over and above what we have in place,
we're ready to do that.
And I will make one last point: When this bankruptcy issue
became an issue, we worked closely with the industry and were
able to develop what we call an emergency management fund.
Again, a State fund put in place; the Governor's office,
Governor Guinn's office, reviewed the budget; the Nevada
Legislature approved our budgets, so there is some willingness
to work there.
And what we have in place now is a moderate fund of
approximately $300,000 per year that enables the State, if it
needs to--if in fact some of these problems in terms of
vacating a site occur, we would have the ability or have the
ability now to have a contractor in place to simply go out and
handle it while we transition to dealing with the bonding
companies.
So, I don't know that you can estimate or take that
bankruptcies automatically are a cost to the taxpayer. Frankly,
in this State that simply hasn't materialized, and I can only
assure you that we won't let it materialize.
Mr. Gibbons. Thank you.
Dr. Miller, you're a renowned scientist, and a lot of us
respect your opinions and the studies that you have done. When
you talk about these ground waters in mines, do we have good
data for pre-mining ground water studies that show the
composition and the quality of the water before mining was
there?
Mr. Miller. Yes, I would indicate that there is at least
one mine that I know of that went into bankruptcy where the
bond was put back and it's cost much more. That's the Fury Mine
in a national forest just south of Berlington. It was a
$160,000 bond and it's cost in excess of $500,000, that the
Forest Service has put in. That's one example. And that was an
older mine from the early 1980's, that had no State involvement
except from the regulatory perspective.
There are several examples and I would be happy to provide
those at the request of the Committee. There is an example
where the ground water has been, I think, substantially
impacted just because of reinfiltration of dewatering water,
and that's a site north of Winnemucca where the total dissolved
solids has gone from on the order of 100 milligrams per liter
to over 1,000 milligrams per liter because of water that was a
pretty good quality water, then it was infiltrated in ponds,
it's settled and gone back to the ground water system and
dragged a lot of salts with it.
That's no longer being done. There is another example where
we have data where the water has ponded and then daylighted out
some distance away, in new springs where this occurred where
the electrical conductivity has gone upwards of 8,000 micros
per centimeter, which is a fairly saline water, so that's two
examples of where water has reinfiltrated and daylights some
other place or goes down in the ground water system.
There is an example with very good data from the
Independence Mining Company's Jerrit Canyon Mine, a very large
tailings impoundment, 2- or 300--300 acres I believe is the
size, where there is a very good marker in chloride, where
there is water that is flowing down there in an ephemeral
stream coming from where the chloride concentration is above
that tailings impoundment, or nearly 14 milligrams per liter,
and at least two majors that have made with over 700 milligrams
per liter, which chloride is not a problem, but it indicates
there is water that is migrating from that tailings impoundment
underground and daylighting into an ephemeral stream that does
drain into the water. There is another example where the
sulfates concentration of three existing mines are less than 30
milligrams per liter, that in one drainage below waste rock, go
over 1,400 milligrams per liter.
Clearly, indications I think that all is not perfect. I
mean, I think the Division and I--I don't want to get into an
argument with the Division. I think the Division does a good
job, and the BLM and Forest Service does a good job, but there
are problems that occur.
Nobody lets problems happen when you know a problem is
going to happen. If you know the problem is going to happen--
the Division of Environmental Protection and the agencies are
very good about just not permitting it, if they know it's going
to happen, but it gets in the gray area where we think it won't
or it might, or there is a remote chance that it will, and that
is where the issue comes up when you expect it won't happen.
And I was one who never expected the Big Springs--I thought
that was a model mine, and it was a model mine, great
reclamation, a good example. Bad things happen even when you
have a well-thought-out plan. Those are the problems. And who's
going to pay for those?
That's the biggest issue, all those inadvertent problems
that are created. Nobody thought, I think that the Ketch-up
Flat or Paradise Peak mine site would be as much of a problem
as it is today, but who's going to pay for that? And that's the
real question, I think, on fees, and that's where I think there
needs to be some funding established to address these
inadvertent problems when mining companies go under and when
problems arise in the years ahead.
Mr. Gibbons. Mr. Drozdoff, of course, you have just heard
Dr. Miller. I don't want to pit Dr. Miller against you----
Mr. Miller. I don't either.
Mr. Gibbons. [continuing] but could you give me your
interpretation and your impression of what the testimony was
you just heard?
Mr. Drozdoff. Yes, I can, and I appreciate your sensitivity
to that, because it's not my desire either.
I guess there is a number of ways I can go.
Philosophically, I don't know that you can call something of an
issue a problem. And I guess, you know, if the standard of
environmental protection statutes, be they Federal or State, is
that you're never going to have issues to deal with, I think
that's an impossible standard.
I mean the fact is clean water--every Federal environmental
standard that is out there, there are certainly issues and
sites that come along with them. And that's part of what we do.
I think, I think for there to be an effective environmental
protection statute or regulation is when you're confronted with
these issues what do you do, are you equipped to deal with
them? I think that's the seminal point.
You know, I don't want to get into--I would be glad to
though, if you would like summaries of any of these issues
discussed today, I will be glad to update you on what the State
of Nevada Division of Environmental Protection has done in
regards to these issues.
Mr. Gibbons. For the record, would you submit them? We
don't need to go into them in detail at this point, but we
would like to have this information for the Committee at a time
so that we can look at it.
[The information follows:]
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Mr. Gibbons. Let me ask one final question, Mr. Drozdoff,
and I certainly appreciate the patience all three of you have
given to us today.
Earlier--and you heard me ask the Governor's office this
question--the Department of Interior has maintained that their
draft 3809 regulations were developed in cooperation with the
states, as the State agency with primary responsibility for
regulating surface mining, has the Department of Interior
solicited a lot of input, some input from your agency in
writing their draft 3809 regulations on surface mining?
Mr. Drozdoff. I would say that we have not been given--our
wishes have simply not been heard in this process. It's true
that the BLM met formally three times with the states via the
western governors, but the fact is that, as the Governor's
representative stated, we believe that our input has largely
been ignored.
I can refer you to a letter that the western Governors
wrote back early in the process, March of 1997, where we asked
for five basic points: to focus on outcomes; to examine the
existing Federal regulatory tools; to recognize differences in
climate and geology; to avoid extreme and outdated examples;
and focus on intra-agency cooperation.
I will tell you, that in the draft that is out today, none
of these five principles that we have asked for were dealt
with. So I'd characterize the meetings as yes, they were
perfunctory, we had them, but I candidly do not believe that
our interests or inputs or comments have been heard.
Mr. Gibbons. Do you have that letter in front of you?
Mr. Drozdoff. Yes.
Mr. Gibbons. Would you submit a copy of that for the
record?
Mr. Drozdoff. Sure.
Mr. Gibbons. Also, if there is a summary of any attempted
meetings would you also submit that for the record?
Mr. Drozdoff. I will.
Mr. Gibbons. That goes for any of the witnesses here. They
are certainly free at any time to make supplemental inputs to
this process.
Gentlemen, I appreciate your involvement.
Mr. Myers. Would you mind if I add something. You
questioned a number that I provided, and I can tell you exactly
where the $143 million came from before. It's based upon
numbers that I didn't do the calculation of, but what it was
is, if you figure about a $300 price for gold, an 8 percent
smelter royalty, just 8 percent on $300, that's about what a
little over 7 million ounces production, which is the 1995
value, you come up close to $143 million. That's about where
that number comes from, so I'd like to--I'd like to--I mean you
have managed to question numbers rather than the ideas that I
presented here, and that, you know, I am sorry but that was----
Mr. Gibbons. Well, I want you to understand that 32
percent, as you heard testified by the State Division of
Mineral Resources, is the amount of gold that is produced off
of public lands, so in that case, you're only going to have 32
percent of your $143 million; and that's where I was trying to
get at your testimony, that we are, as a State, or whatever,
missing $143 million. It isn't questioning your integrity. It's
questioning the documentation and the information that you have
presented.
Gentlemen, thank you very much. We appreciate it greatly.
I'd like to call our fourth panel: Mr. Stan Dempsey, the
Chairman of Royal Gold, Incorporated, Denver, Colorado; Ann
Carpenter, Vice President, Exploration and Business
Development, Nevada Colca Gold, Inc., Reno; Hugh Ingle,
President, Nevada Miners and Prospectors Association,
Yerington, Nevada; and Mr. Frank Lewis, F.W. Lewis,
Incorporated, Reno, Nevada.
Before we hear your testimony, we have a process of
swearing you in. Would you all raise your right hands?
[Witnesses sworn.]
Mr. Gibbons. You may be seated.
Mr. Dempsey, the floor is yours.
STATEMENT OF STAN DEMPSEY, CHAIRMAN, ROYAL GOLD, INCORPORATED,
DENVER, COLORADO
Mr. Dempsey. Thank you, Mr. Chairman. I am Stanley Dempsey,
Chairman of Royal Gold, Inc. Royal is a gold royalty company.
It's a public company and its shares are listed on the NASDAQ
national market system and the Toronto stock exchange.
Our market capitalization is around $75 million. We have
3,000 shareholders in this country and some institutional
shareholders in places like France and Switzerland. We spend
about $3\1/2\ million per year on exploration. About half of
that is in the U.S. and about a half of it is overseas, mostly
in Europe.
We're also investing additional funds in projects operated
by other mining firms. Our typical project involves the search
for a deposit large enough to interest a major mining company.
We then typically farm out the project, keeping a royalty.
As a royalty company, we think we do have a pretty good
understanding of the economics of mineral royalties, and one
thing that we're very careful about is to never burden a mine
with so much royalty burden that we injure the ability of the
mine to produce.
It would be a hollow triumph to own a royalty on a mine
that is not operating. We have no debt, and we will be
profitable next year, but we must live off what we have and
what we will have coming in in the coming year. I say that
because the capital markets for exploration dollars are as flat
as I've ever seen them in my career.
Just to give you an anecdote: We recently listed on the
stock exchange in Toronto, and our listing ceremony is Monday.
I'll go back to Toronto tomorrow to participate in that. The
investment bank that is our sponsor on the Toronto exchange,
three weeks ago said, ``We don't think we really need a party
as a part of the listing ceremony because nobody is interested
in gold stocks.''
Two weeks ago they called back and said, ``Gosh, the
markets are heating up; things are looking better. Maybe we
ought to have a party.'' Thursday we got another call.
Subsequent to the sell-off of gold by the British, no party.
So in the industry, we used to look at windows opening for
financing, and of course Canada is one of the principal places
that people in the smaller companies go to get capital, both
Canada and Europe. We used to have windows that would go for 6
or 8 weeks, and people had prospectuses all canned up and ready
to go.
Today the windows are maybe a week long or less, so it's
absolutely true that the exploration industry's source of
capital has dried up. How long that will be, we don't know, but
it's a difficulty for the industry and a difficulty for the
folks that make their living in exploration in Nevada.
To get right to the point, since most of my testimony has
been given already by my predecessors and certainly the State
folks who have done a good job, too, and I endorse the many
things that my mining colleagues have said in their testimony.
With regards to the claim fees, the Federal claim fees, our
company supports claim fees. We think it was a useful change in
the mining law because it cleared up the pedis possessio
problem the explorers had. It's gotten rid of a lot of fraud.
In saying that, those claim fees do need to be reasonable
because they are a major issue in deciding how long to keep a
set of mining claims. Obviously there was a big drop in claims
in 1993 or 1994. In looking at the data that the BLM has
collected in the last few years, it looked like the claim
maintenance fees had sort of come into equilibrium, some claims
being added, some going out.
I think that we may see another serious drop in the number
of claims because explorers like our company are looking at the
situation and we're changing our targets a little bit to
emphasize grade; and looking for large, low grade heap leaches
at the moment is not particularly attractive.
We're shifting our strategy to much higher grade material.
Those are extensive programs that require lots of claims to be
effective, and we're actively cutting back.
I attached to your copy of my written submission, some
charts of some of our projects around the State. They include
some projects we have dropped, like Ferber. That's a project
that started for gold. We think there is probably a copper
project there that may be economic. We've dropped it. We just
can't stand the land holding costs. We're just not getting
money into the ground.
You can see in those charts how the claim fees do affect
it. You can also see my chart for Milos in Greece where I have
the whole Island of Milos tied up under a mining license from
the State of Greece and the Nation of Greece.
You can see the relative claim fee costs there. So it's my
testimony Congressman, that claim fees are extremely important.
They are probably a little high. It might even be a time for
the government to think about at least a temporary lowering of
those fees to recognize the situation that we're in. Thank you.
Mr. Gibbons. Thank you, very much, Mr. Dempsey.
[The prepared statement of Mr. Dempsey follows:]
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Mr. Gibbons. Ms. Carpenter, it's your turn.
STATEMENT OF ANN CARPENTER, VICE PRESIDENT, EXPLORATION AND
BUSINESS DEVELOPMENT, NEVADA COLCA GOLD, INC., RENO, NEVADA
Ms. Carpenter. My name is Ann Carpenter I am founder and
director of Nevada Colca Gold, Inc., a small Nevada corporation
which focuses on doing exploration and mining hopefully in the
U.S. and in Mexico. The group is made up of four individuals
with international and domestic experience in exploration and
in mining.
In addition, I'm here representing the Women's Mining
Coalition. I'm the president of the Women's Mining Coalition
and this coalition is a grass roots organization supporting
environmentally responsible mining.
As I said, NCGI is currently focused here in the U.S. As
well as Mexico, but we've found that we need to start shifting
our attention only to Mexico. We're diminishing our attention
here in the United States because of the prohibitive state of
business here in the U.S., if you will.
Existing and proposed Federal and State fees, cumulatively
these equate to a significant financial burden in both today's
low metal prices as well as in times of strong metal prices.
As well, current political and regulatory environments in
the U.S. create a negative environment within which to develop
a mining exploration related business.
Our corporation is just starting up. As we all know, in
business everything is timing, and maybe the timing just isn't
correct now, but we're finding it very, very difficult to do
any business here in the U.S. especially with the proposed
fees, and with the proposed changes to regulations.
Doing business in Mexico especially, it's quite a bit more
friendly, as was previously intimated by the panel that first
spoke. I believe it was Al Coyner, who indicated that--well,
no, actually it was Mr. Parratt whose testimony illustrated
that the cost per acre of doing business here in the U.S. was
significantly higher than anywhere overseas; and certainly we
see that in Mexico and other Latin American countries. I've
done quite a bit of exploration in Latin American based
countries as well as in Africa, and we have seen quite a bit of
difference in those cost per acre bases.
I have to indicate, too, that in Mexico, I would not
consider Mexico virgin ground. Mexico has at least a 500-, 450-
year mining and/or exploration history. The reason that we want
to do business there is that two of my partners or associates
have experience doing operations in Mexico, for some of which
they have received accolades and environmental awards.
Business in Mexico is very similar to--especially
regulations, reclamation regulations--are very similar to the
U.S. Mexico has adopted lot of the EPA standards, and
implemented them. And the responsible mining companies doing
business in Mexico have implemented them as per choice.
Some of the negative regulatory political changes at hand
are also reasons for pushing exploration of mining focuses for
our company off shore. The Leshy mill site opinion; clean air
and clean water proposals; TRI; certainly the 3809 proposed
revisions; diesel particulate rule making; MSHA; land disposal
issues and others, that's just a partial list.
As was previously talked about--again, I think this was Al
Coyner that said this--we need a partnership in assessing
proposed Federal fees, just like we have the partnership that
has been developed here in the State between the NDEP and the
Federal agencies.
In my previous capacity with another company I was the
exploration manager and I was in charge of trying to put--
permitting a large 1.5 million ounce deposit very close to
Reno, and I had to work closely with both the State of Nevada
Department of Environmental Protection as well as the BLM in
trying to push this through, and I can tell you that those two
agencies, they had adopted a memorandum of our understanding,
and they implemented it very easily, and they worked well
together, and they have evolved into what I can see is a decent
working relationship between the two agencies They complement
each other; they add a check and balance.
This was not an easy project. It had pit lake issues, it
was close to a rural town. It had a lot of the significant
issues that you see with some of the larger sized mines, and
they were dealt with, the mitigation measures that were
recommended were agreed to, and both agencies came together and
worked well on it.
NCGI did try to fund three properties here in this State,
and we were not able to get funding, and as Mr. Dempsey has
indicated, you generally go to Canada, Europe, Japan, anywhere,
for the funding, and it's become very, very difficult to get
funding in today's market because of the low gold prices.
Our company has tried to focus on production-oriented
projects as a start up and not just exploration based, and it's
still very difficult to find the funding. And with that I will
close.
Mr. Gibbons. Thank you very much, Ms. Carpenter. I
appreciate that.
[The prepared statement of Ms. Carpenter follows:]
Statement of Ann S. Carpenter, Vice President, Exploration and Business
Development, Nevada Colca Gold, Inc., Reno, Nevada
Some of the negative regulatory and political concerns
include the actions listed below:
The Leshy millsite opinion (politically driven
``takings'') affecting: Battle Mountains's Crown Jewel project,
Noranda's Montnare project in Montana; and Kinross' Delamar
mine in Idaho.
Clean Air and Clean Water proposed rules;
TRI;
3809 proposed revisions;
Diesel Particulate rulemaking;
MSHA;
Land disposal issues
Others . . .
All of the above (as well as other proposed rulemakings not listed)
complicate the ability to do business here in the U.S. All are costing
the industry on both an individual and on a cumulative level. The
expense and time it takes to review the individual and cumulative
effects of all of these actions is adding up, creating an economically
negative business environment here in the U.S. With all of the proposed
rulemakings and changes to existing legislation and regulations, there
have been few to no resulting benefits illustrated. These actions are
tantamount to a politically motivated anti-Mining (anti-resource)
environment.
NCGI has tried to fund three properties here in the state of
Nevada, without success. Funding has been virtually impossible to
secure to support exploration and development activities. Some funding
institutions and individuals perceive doing business in the U.S. as a
negative, due to existing and proposed Federal and state fees, as well
as to all of the current political and regulatory activities. NCGI has
therefore focussed most of its activities in Mexico, where funding has
been easier to secure to advance projects.
Thank you for allowing me to testify.
Mr. Gibbons. Mr. Ingle, the floor is yours.
STATEMENT OF HUGH INGLE, PRESIDENT, NEVADA MINERS AND
PROSPECTORS ASSOCIATION, YERINGTON, NEVADA
Mr. Ingle. Mr. Chairman, I'm President of the Nevada Miners
and Prospectors Association, and that's NMPA, and we agree that
mining is in a graveyard spiral; that the Federal Government is
at the controls; the government has ceased to scan the
instrument panel and is focused on only one instrument, gold.
Because there are still profitable gold mines, it seems
like the Federal Government has decided to load them up with
laws, rules, regulations, fees, fines and so forth in an effort
to find the breaking point without considering that these same
costs will be applied to the mining of the less noble metals
and minerals which helped us win World War II and the Korean
War.
These rules, regulations, and so forth may preclude the
mining of these other mineral assets quickly enough in
emergencies similar to the Korean War. During World War II,
mining was considered so critical to the war effort that miners
were exempt from the draft.
Nevada has significant deposits of tungsten, mercury,
manganese, copper, iron, molybdenum, lead, antimony, beryllium
and vanadium, with some ores containing combinations of these
minerals. At various times Nevada has led the Nation in the
production of many of these minerals.
Many ore deposits are small by today's standards, less than
100 tons per day production, and require the expertise of the
small operators to be successful, an expertise that is rapidly
disappearing from the western U.S.
In contrast to the attitude of the Federal Government, the
State of Nevada seeks to encourage exploration for and the
opening of new mines. Nevada encourages the small operators as
well as the large. Small operators are aided by the various
Nevada agencies. These agencies actually serve in large part as
a staff for the small operators if called upon.
They also enforce regulations. The State of Nevada
recognizes the vast difference between small and large
operations, and in the past has tried to provide for the
survival of the small operator.
The effect of Federal mining fees and proposed Federal
royalties on State and local revenues in the mining industry in
general is to discourage exploration for new domestic mines,
change some of our reserves to waste, and shorten mine life.
There are many rules and regulations which are enforced by
the State of Nevada but mandated by the Federal Government.
There are at least 33 possible State and Federal permits that
may be required, not all of which are required for each and
every mining and milling operation.
In addition, some local regulations may need to be met.
Suffice it to say that every rule or regulation passed that
adds to the cost of mining or processing turns some ore into
waste. An example of this would be the proposed Federal
royalties which would add costs to and probably come out of
revenues now reserved for States and local government entities.
The Nevada Miners and Prospectors Association believes that
this revenue would only be a pittance to the Federal
Government, but could be the life blood of rural Nevada.
The NMPA believes that the most damaging rule for the small
operator and prospector was the imposition of the $100 per
claim annual fee in 1993. Active mining claims held in Nevada
dropped from 334,558 to 143,805. That differs a little bit with
other figures that you got, but not much.
Most of the claims were dropped by small operators and
prospectors. Many of those claims held strategic metals and
minerals that are temporarily not in demand. Now, instead of
developing new mines and prospects as the original rules
intended, those who can afford to pay the fee pay the fee, and
no prospect or mine is developed.
An additional fallout from moving people off claims either
by occupancy rules or by fees is the cost for abandoned mine
lands which the surviving claim owners now pay.
One of our greatest concerns is the timely availability of
a reliable domestic supply of minerals and metals in times of
national emergency. Many ships that were sunk and crews lost
transporting ores and minerals in early World War II should be
ample warning for the future.
Perhaps the Federal Government is living proof of Thomas
Sowell's observation, ``What we learn from history is that we
never learn anything from history.''
Thank you.
[The prepared statement of Mr. Ingle follows:]
Statement of Hugh C. Ingle, Jr., President, Nevada Miners and
Prospectors Association
The Nevada Miners and Prospectors Association (NMPA)
believes that Nevada mining is in a graveyard spiral and that
the Federal Government is at the controls. The government has
ceased to scan the instrument panel and has focused on only one
instrument--gold. Because there are still some profitable gold
mines, it seems that the Federal Government has decided to load
them up with all the laws, rules, regulations, fees, fines,
etc. in an effort to find the breaking point without
considering that these same costs will be applied to the mining
of the less noble metals and minerals which helped us win WWII
and the Korean War. These rules, regulations, etc. may preclude
the mining of these other mineral assets quickly enough in
emergencies similar to the Korean War.
From Nevada Bureau of Mines and Geology Special Publication
15, I quote: ``Responding to the extraordinary demand for base
metals, expansion of open pit mining during 1951 resulted in a
sizable increase in Nevada copper production. However, the
output of lead and zinc, reflecting the dearth of ore that
could be developed rapidly and economically fell considerably
below 1950.'' Nevada has significant deposits of tungsten,
mercury, manganese, copper, iron, molybdenum, lead, zinc,
silver, placer gold, antimony, beryllium, and vanadium, with
some ores containing combinations of these minerals. During
1955 there were 222 individual tungsten operations in Nevada.
At various times, Nevada has led the nation in production of
many of these minerals. Many ore deposits are small by today's
standards (less than 100 tons/day production) and require the
expertise of the small operators to be successful, an expertise
that is rapidly disappearing from the western U.S.
In contrast to the attitude of the Federal Government, the
State of Nevada seeks to encourage the exploration for and the
opening of new mines. Nevada encourages the small operators as
well as the large. Small operators are aided by the Nevada
Division of Minerals, the Nevada Division of Environmental
Protection, the Nevada Mine Inspector, and the Nevada Division
of Wildlife. These agencies actually serve in large part as a
``Staff'' for the small operators if called upon. They also
enforce the regulations. Unfortunately there is no allowance
made for the vast differences in operations between the small
operators and the large ones under the latest BLM 3809
proposal. The Notice level in the old 3809 Regulations provided
for this difference; the State of Nevada recognizes this
difference and in the past has tried to provide for the
survival of the small operator. Another quote from Special
Publication 15 is significant at this point, ``Many factors
including low gold prices, an increase of state and Federal
regulations affecting mining, and increased uncertainty
concerning long term access to Federal lands for mineral
development contributed to the decline in gold exploration from
1989 to 1992.''
The ``Effect of Federal Mining Fees and Proposed Federal
Royalties on State and Local Revenues and the Mining Industry''
in general is to discourage exploration for new domestic mines,
encourage exploration for foreign mines, change some ``ore
reserves'' to ``waste,'' shorten mine life, strip some rural
communities and counties of their tax base, economy, and much
of their employment, and destroy the livelihood of small mine
operators, small businesses that provide mine services, local
independent geologists and prospectors, and destroy a ``way of
life'' for those hardy souls who value their independence more
than life. There are many rules and regulations which are
enforced by the State of Nevada but mandated by the Federal
Government, so that the ``State and Federal Permits Required in
Nevada before Mining or Milling Can Begin'' is a hybrid and the
blame hard to place correctly. There are at least thirty-three
possible State and Federal permits that may be required, not
all of which are required for each and every mining and milling
operation. In addition some local regulations may need to be
met. Suffice it to say that every rule or regulation passed
that adds to the costs of mining or processing turns some
``ore'' into ``waste'' and denies the people of the United
States the value and use of an asset. I don't mean to imply
that we don't need regulations, not at all, but only that we be
judicious, and make sure that what we lose is worth the price
we pay. An example of this would be the proposed Federal
Royalties which would add to costs and probably come out of
revenues now reserved for the states and local government
entities. The Nevada Miners and Prospectors Association
believes that this revenue would only be a pittance to the
Federal Government but could be the lifeblood of rural Nevada.
By the nonimplementation of Alternative 3 in the newly proposed
BLM 3809 regulations, enough money may be saved to avoid the
need for a Federal royalty.
The NMPA believes that the most damaging rule for the small
operator and prospector was the imposition of the $100 per
claim annual fee in 1993. Active mining claims held in Nevada
dropped from 334,558 to 143,805. Most of the claims were
dropped by small operators and prospectors. Many of those
claims held strategic metals or minerals that were temporarily
not in demand. There still remain 138,000 active mining claims
in Nevada, with a total of 7,333 claimants. Over 65 percent of
all claimants hold less than ten claims and an additional 14
percent hold eleven to twenty claims. This group is the nucleus
of the small operators. Now, instead of developing new mines
and prospects as the original rules intended, those who can
afford it pay the fee and no prospect or mine is developed. An
additional fallout from moving people off the claims, either by
occupancy rules or by fees, is the cost for abandoned Mine
Lands, for which the surviving claim holders now pay fees.
One of our greatest concerns is the timely availability of
a reliable domestic supply of minerals and metals in a time of
national emergency. The many ships that were sunk and crews
lost transporting ores and minerals early in WWII should be
ample warning for the future. Perhaps the Federal Government is
living proof of Thomas Sowell's observation--``What we learn
from history is that we never learn anything from history.''
Mr. Gibbons. Thank you, Mr. Ingle, and may I say there has
been a great deal of change in the philosophy of this country
since World War II. When I graduated with my first degree in
mining geology in 1967, my first job wasn't in the industry. It
was in the military. The day I walked home with my diploma,
handed it to my mother she handed me my draft notice. So we
have changed philosophies in this country about the importance
of mining.
Mr. Ingle. I didn't get a chance to graduate before they
got me.
Mr. Gibbons. Mr. Lewis, please.
STATEMENT OF F. W. LEWIS, F.W. LEWIS, INCORPORATED, RENO,
NEVADA
Mr. Lewis. Congressman Gibbons, thank you very much for
listening to me. I'm trying to give some specific examples of
what's happened to me since I started mining in 1953 in Ely,
Nevada.
My company owns the Lewis Mine in Humboldt County Nevada.
It's leased to a small Canadian company that has an adjacent
mine. They have been working there for the last 15 years, and
at the peak of their operation, which was a couple of years
ago, they had 212 employees.
They shut down mining last year and they have 50 men
working on the shut down. It's very interesting to note that
this year, they have purchased some mining properties and joint
ventured with some companies working in South America.
We're sending the jobs down there from here as we close
down our mines due to I think very onerous and unnecessary
regulations and fees. I had a lot of mining claims that I spent
my life developing in different areas of Nevada.
I made quite a little bit of money mining, and I've spent
it all mining, too, and that has been a problem with my wife at
times, but she's still with me, so she put up with me for a
long time.
I dropped 75 percent of the mining claims in whole
districts that I had a lot of interest in, and I spent a lot of
money on over the years trying to find ore, but if you give the
money to the Federal Government, you can't put it in the
ground, so those areas are abandoned of interest unless
somebody else has them.
I had a small operating mine in Churchill County. I bought
that property first in 1962. I am happy to see one of your
aides, John Rishel, sitting at your right hand, who worked on
that property. I met him, he was sitting there in 1975, I had
it leased to a small Canadian company, and they were trying to
drill for some ore. I drilled later and found additional ore.
I drilled a 1,000-foot decline there and put in many drill
holes trying to set up a small mine. I had two working miners
and a supervisor working for me in my little two-bit company. I
also had, at that time, after these previous rules and
regulations were put into effect, I had to have one man working
on the permitting and the evaluation and all the things that
the environmental people have put into the law.
Well, one man doesn't sound like much, does it? It was 25
percent of my payroll. That's a pretty big thing, and that's
the reason that there are very few, if any, small miners
working here in Nevada today.
Hugh Ingle is still struggling; I gave up. I shut down the
operation and spent $1 million of my own savings when I did so.
Because of the increased fees, the $15,000 I was paying on the
unpatented claims surrounding my mining claims, and the onerous
regulations, I couldn't make any money. I couldn't stand it, so
there is a mine that won't be mined unless something happens.
It's interesting about the talk about the price of gold.
The first mine I worked in was in Ely, Nevada. I worked with my
father-in-law. It was a hand pick and shovel job. Gold was $35
an ounce, silver was 90 cents. So I haven't seen it all, but I
have seen a lot. I have seen it go up and I have seen it go
down.
And you have fluctuations in the mining industry, and
that's the problem with the Federal laws, there is no
flexibility. It used to be you could work on a project, spend
your money, and in hard times, sometimes you wouldn't have any
money to spend other than just assessment work, but you could
hang on. There is a longevity to it, and in some places I've
worked over 40 years trying to develop a mine. Some of them
have been leased out at times during good times, and then you
get them back.
Another comment that you have talked about extensively
that's not in my notes, it's about these various kinds of
royalties. The mine finder, which is sometimes people like me,
the land owner, which is people sometimes like me, when we
lease a mine, the operator gets to deduct some of his expenses.
It might be of interest to you to know that on every nickel
I get by way of a royalty on the mine, I pay a gross tax and
there is no compensation or deduction for any of the
exploration costs or expenses that I had and the ongoing
monitoring fees, and so, when the Federal Government puts an 8
percent net smelter, that means there will be 13 percent coming
from the fellow that had to go find it, if he gets anything,
because he probably won't get anything because the Federal
Government will be getting the royalty he might have gotten,
and that's a very great discouragement to exploration people.
I will give you another specific example. My son went to
the Mackay School of Mines; he got a degree in metallurgical
engineering, and he opened up an assay lab in Reno, and I
helped finance him. And he had a very nice business going, had
22 employees and made a profit every year for a long time.
He now has 12 employees and the reason is because the
companies are going elsewhere where they are more friendly
received. And he's going to have to go there, too, if the
mining exploration stops in Nevada.
I see I have a yellow light, so thank you very much.
[The prepared statement of Mr. Lewis follows:]
Statement of F. W. Lewis, F. W. Lewis, Inc., Reno, Nevada
Mr. Chairman Congressman Gibbons and Members of the
Subcommittee:
I am writing my comments about the annual claim fees,
proposed royalties to be collected from BLM and Forest Service
lands, other laws and regulations, and the 3809 revisions which
are being placed on mining in the United States.
My company owns the Lewis Mine in Humboldt County Nevada.
It is leased to a small Canadian company that has produced on
it periodically for the last fifteen years. The payments from
that operation have been of major impact to keep my own company
going. They had two hundred eleven employees at one time. They
ceased production last year and there are about fifty employees
left slowly shutting down the operation. It might be of
interest to this Committee while they are shutting down here
they have acquired several South American projects which they
are opening up. The jobs here are being transferred there to
more friendly countries that want to expand the development of
their natural resources.
I had a small operating mine in Mineral County, Nevada. I
had two miners working, and a working supervisor. I had to hire
one other professional to manage the environmental regulations.
He produced absolutely nothing, and therefor the operation lost
money. I had to shut the mine down, tear out all of the
equipment, drop a hundred and fifty unpatented claims and give
up. I had spent over a million dollars on the operation of my
own savings. I had been working on this property since 1962
forced out of business by the added costs of the Federal
Government rules regulations and fees.
My son Mark went to School at the Mackay School of Mines
earning a degree in Metallurgical Engineering. Fifteen years
ago he opened an assay laboratory, and I financed him. Last
year the operation was down fifty percent in gross sales with
the exodus of mining to foreign soils. No one in the Federal
Government seems to care what is happening in the Industry and
no one is trying to do anything about it, except perhaps some
few in the Congress. On the other hand the Bureaucrats have
done everything in their power to make matters worse. Trying to
figure out why or who is trying to kill the Mining Industry
would be a good exercise of this Committee. What's the sense of
it? My son's employees have dropped from twenty-two to twelve.
If exploration ceases he will have to close, perhaps moving to
South America if he wants to continue his profession.
Forty-five years ago I moved to Ely Nevada. I worked for a
contractor who worked for the Consolidated Copper Mines
Company, which was later bought out by Kennecott.
I met my wife's father and we went into the mining business
in Ely shipping gold and silver flux ore to Kennecott. This was
pick and shovel, hand tramming, and a 5-ton old 1939 truck to
haul our ore off the hill. I did not even have a thermos
bottle. My wife, Sharon used to walk the mile up the side of
the mountain at noon in the winter time to bring us a quart
mason jar full of hot coffee. One time I figured it out and we
were making a little over five dollars an hour, after paying
our expenses.
Those were of course the ``good old days.'' Those were the
days when the American government believed in private property,
instead of so much in Federal property. The government's job
was to protect our shores and our property for the people. Now
they perceive their job is to protect the land from the people.
I remember then how helpful the Federal Government used to
try to be to encourage mining and private investment. They had
Federal 0.M.E. loans, which they offered prospectors and small
miners to encourage them to drill and explore. Although I never
obtained any such loan I know several people who did, and mines
were developed because of it.
The United States Bureau of Mines itself would go
prospecting in promising mining districts even drilling on
lands that were owned by private individuals. Such holes were
drilled on some patented claims, which my company owns in
Silverton, Colorado.
Some of this encouragement of the mineral production was
because a certain Senator or Congressman from Oklahoma mapped
where all the ships were sunk during the Second World War
trying to bring essential raw minerals to our war industries.
If my memory serves me I think his name might have been
something like Ed Edmonds (?). There were thousands of ships
sunk, and thousands of Americans killed because many of our
mines had shut down due to the depression.
Batan fell because our soldiers were out of materials to
fight with, not because a superior force beat our men. The
Federal Government itself was negligent in failing to supply
sufficient ammunition and other supplies so our men could
continue fighting. I was told that much of the ammunition they
did have was surplus left over from World War One. The Federal
Government knew War was likely, but they did little to see that
our overseas bases were properly supplied with what they needed
to fight with.
A person even now can purchase a private parcel of land in
Nevada for as little as $50 per acre, some for a $100 and some
for $200. Some prime property, of course, is worth more.
The hundred dollar annual fee, and threat of the existing
Federal regulations for rehabilitation of lands used in mining
now require one to spend tens of thousands of dollars, hundreds
of thousands of dollars, occasionally even a million dollars
per acre rehabilitating land. Rehabilitation means covering
over a valuable future mining site when the country may some
day need the low-grade minerals left in the ground. The best
value to our nation for these lands should be left exposed so
we can enjoy those beautiful veins, dips, angles, spurs,
beddings, rocks and minerals. Then present day prospectors can
see, explore, and enjoy them, and future generations can start
there when they need more of the minerals.
What an economic wasteful attitude the Federal Government
has adopted. They have decided what is the best way for them,
not us to enjoy the Federal lands.
Somehow or other the Federal Government with the
environmental community has decided that the only thing that
has beauty is the top of the last sagebrush leaf which has
fallen off the bush.
What about the Grand Canyon? It is but a big beautiful hole
in the ground. If it were man made the Federal Government and
environmentalist would want to cover it up spending billions on
the non-productivity activity, which removes capital from our
society that could produce factories, jobs, and wealth for our
nation.
The Federal Government used to think private property was
one of the sources of wealth and happiness of our nation's
citizens. At some point in time many in the Federal bureaucracy
and environmental organizations have become convinced that the
Federal Government should own and control property.
The big change started I noticed around 1955.
I was drafted into the army in 1955. I remember sitting on
the edge of my cot in Fort Ord California basic training camp
sending twenty five of the ninety dollars per month I was
earning to Jon Collins, my then attorney, trying to fight the
Forest Service who was condemning the surface rights to my
mining claims. They had passed the Surface Management Act.
Ever since then it has been a fight for survival against
the Federal Government and their overstaffed non-producing
employees.
These hundred dollar annual fees, regulations, new 3809
regulations are just another impediment to explore and mine for
those of us who make our living, and who enjoy the mining
industry.
The rules extend permitting time, require the BLM to expand
its presence by hiring many new non-productive people, cost a
lot of money-wasted, for no economic benefit to our society.
All together the anti mining acts will also cost the State of
Nevada good paying jobs and loose the State and counties tax
money, and net proceeds of mine taxes they now receive from
mines.
I have slowly been going out of the Mining Business. With
the hundred dollar claim fees I dropped over three-quarters of
my unpatented claims. Every new law and every new fee will
force more of us to stop trying to find minerals. But, then
isn't that the purpose?
I have stopped staking claims.
I have stopped my drilling programs because I now have to
give the Federal Government annual fees using the money I would
normally spend on exploration to pay them rather than to try to
find something. Then too the new permitting requirements
already on the books are so time consuming and so discouraging,
that it no longer seems a wise investment.
The unfriendly Government has convinced me that I should
not spend my savings on mining any more as I have done for the
last forty-five years.
It is not just the laws they have already passed but they
have demonstrated that they are going to continue passing new
regulations, charge more for everything, hire more government
employees, and have ever-stricter regulations. Some mines have
spent as many as fifteen years in the permitting process trying
to open up.
In my view it is now impossible for a small individual to
mine anything. A few may still be trying, but not many. An
unfriendly Government has killed us dead.
It is still possible for an individual to prospect, and try
to find a financed company to deal his properties to. More fees
and more regulations, and especially if Royalties are assessed
by the Federal Government will kill that window, because the
Federal Government will get the share the person doing the hard
work and making the investment might have gotten.
Every year we are threatened with more and ever more
regulations not passed by Congress but by the Interior
Department and Bureau of Land Management. The newest set of
regulations are known as the 3809 Revisions. They will delay
all forms of exploration, and mining, and make costs greater.
They are unneeded, and by me unwanted and do not help me or any
of my friends, but instead harm us.
If the new 3809 Regulations, Alternative Three, being
proposed by the BLM are passed rest assured more companies will
go into bankruptcy, and nowhere in their assessment have they
accounted for that.
Many mines in Nevada are now loosing money. The Robinson
mine in Ely will have to shut down and Ely will once again be
shrinking in population. Several Mines are now in bankruptcy
partially due to Federal Government Regulations and of course
because of low metal prices. Sometimes I wonder if anyone left
alive in Washington DC has a lick of economic common sense.
Does no one care? We offer money to Honduras because of a
devastating storm. We send food to North Korea because their
people are hungry. NOT ONE RED CENT NOR HELP OF ANY KIND IS
BEING OFFERED TO THE PEOPLE IN ELY TO KEEP THEIR ONE MAIN
INDUSTRY GOING FOR THE SAKE OF EVERY ONE THERE.
Chairman Gibbons, Members of the Subcommittee I thank you
very much for allowing me this opportunity to express myself
Mr. Gibbons. It's proof that the system works. Thank all of
you for your insightful and very helpful testimony.
Let me jump back to Mr. Ingle. You indicated that on
average, it takes 33 permits to open a mine.
Mr. Ingle. Yes.
Mr. Gibbons. Do you have any rough estimate as to how long
that process is from the time you begin working on the
permitting process until the end of the permitting process
enabling you to stick the first shovel in the ground to recover
your investment?
Mr. Ingle. It's pretty hard to say because you have a
public comment period on these permits, and sometimes there is
no opposition and sometimes there is a lot of opposition. So it
can go from--I would think that the minimum for a small
operation would be one year, but some things take 4 or 5 years.
So I can't give you a good figure. I think some of the
bigger companies have experienced long, drawn out affairs, and
so they would be better able to tell you what we do, or have
done is, go to the Division of Environmental Protection; the
Division of Minerals, and the Division of Wildlife.
The State agencies and we have tried to work with them, and
that has been a kind of a fast track with us. We are pretty
small, and we try to make as little noise as possible, as
little dust as possible, and so we're able to avoid a lot of
problems that the big companies have.
Mr. Gibbons. Mr. Dempsey, you talked about shifting your
focus on some of your ongoing mines away from average ore grade
to shifting it to high grade, in other words, to make the
payment on that capital expense. Will you ever be able to go
back and recover the low grade that's left in there without the
presence of some of those high grade pockets? Is there some
economic consideration to doing that when you do it?
Mr. Dempsey. I'm really talking about our exploration
targets, and the type of deposits we're looking at. I'm not
talking about existing mines. With the price decrease, when you
run numbers for a model or hypothetical mine based on the type
of deposits you might find, when you project that you couldn't
make money if you found it, it's not a very good investment.
We look for the same types of things that the majors do,
and they are changing their focus, too. And all of us are
looking for higher grade material, hopefully at the surface,
not necessarily at the surface, but with this type of price
environment, a lot of the things have been the stock and trade
of Nevada, the smaller deposits are not going to be--people
aren't going to look for them.
Mr. Gibbons. Mr. Dempsey, let me ask a question I think a
lot of the people in this audience are curious about. We hear a
lot of times about companies going overseas, going to Mexico.
Do you use the same method of operation, environmental
concerns and considerations in those countries that you use in
this country?
Mr. Dempsey. Absolutely. Everybody in this industry has
gotten the word, that health, safety and environment are major
issues, and all of us are adhering to the highest possible
standards.
Community acceptance is our biggest issue. We're having a
hard time getting permitted anywhere in the world, and the idea
of a pollution haven is nuts. We can't finance a mine overseas
if we don't adhere to the highest standards. The EBRD, the
World Bank, IMF group, all require that we submit impact
statements there, too. So that's one hoary canard that ought to
be put aside.
Mr. Gibbons. Ms. Carpenter, I was interested to hear you
testify as the President of the Nevada Women in Mining
Coalition. Could you tell us a little about what the purpose of
that coalition is and maybe help us understand a little more
about what it does.
Ms. Carpenter. Well, the Women's Mining Coalition was
developed back in 1994 when a couple of key women that are
still involved in the organization thought that they should
take a great idea to the CEOs, that it would be a great idea to
go back to Washington and educate the Congressmen, Senators and
Representatives, on what the mining industry is and put a
different face on it in the sense of women as opposed to men or
just the CEOs going back east and delivering a status quo, if
you will.
What it did is it humanized it--not to say that CEOs are
inhuman, but it provided a different face for people to be able
to relate to the industry, and it showed that women in the
industry span many jobs, from mining engineers to environmental
engineers to geologists to mine geologists, to explorationists,
to environmental coordinators, governmental affairs, the whole
gamut that the men have jobs in, but it just provided a
different relationship for Congress to relate to.
Part of the objective of our coalition is to educate
congressional folks on what the industry is, the fact that we
are an environmentally conscious industry. We're evolving with
the needs, as we discover more and more issues that come up.
We try to be as interactive as possible and meet the
objectives that are raised.
Mr. Gibbons. Do you have any specific examples of women or
people in your coalition that, over the last year, have lost a
job?
Ms. Carpenter. Oh, yes.
Mr. Gibbons. Put a face on that for us, would you, and what
that means to them, what it means to Nevada.
Ms. Carpenter. It's not just Nevada. There is a woman that
I was doing some work with up in Montana. There was a small
mine there we were trying to advance forward and couldn't get
funding on it because, gosh, it's Montana, and they just
outlawed cyanide, and shut the door on a lot of different
issues, and it's been completely politicized up there.
And here is a woman in Montana who used to drive a hog
pack, and she's a single mom raising three kids--and there are
two issues here I might try to a address--but she's trying to
raise a family, and she's in a pretty low rent area, beautiful,
beautiful place to live and the cost of living is not all that
high, but she can't raise a family.
She's lost her job and she's had to go turn to waitressing
to try to support a family, and she can't do it.
This addresses the recreational question I think you had
earlier, where we can replace mining or other technology, say,
with the recreational industry, and she was one testament that
that just doesn't work. She said, ``I don't know about you, but
I don't want to make beds for living and I don't want to make
minimum wage. I can't raise a family on it.''
So she took a job down at Magnum BHP's operation. It could
have been San Miguel or one of the operations down in Arizona,
but she had to leave her home State in order to do that, and
that's just one example. There are many.
Mr. Gibbons. You have been involved in the permitting
process of mines before. Maybe the question I should ask Mr.
Ingle is, is there an average time frame in there? But more
importantly, is there a cost associated with this permitting?
Ms. Carpenter. Yes, time is money. The longer it takes, the
more money it costs. The bigger the project, the more money it
costs because there are a lot more environmental issues that
need to be addressed and greater concerns that need to be
addressed, and that costs money.
And the money that it takes for baseline studies to--in my
case we had a pretty advanced pit lake study that had to be
done which included pit computer modeling and water quality and
quantity issues, and that actually took the longest time. We
realized the greatest delay with that. But there were some big
issues that were raised and needed to be addressed, and
mitigation standards that needed to be drafted up, and then
implemented within the EIS process.
It can be anywhere from a year and a half, now--it used to
be a year. If you had a decent sized project and not too many
issues, if you'd done a baseline study and you realized you
don't have pit lake issues and you don't have any threatened
and endangered species issues, then maybe you could get it done
in a year.
I think it would take that time now. It's at least a year
and a half, and I'd agree with Mr. Ingle here that it would
probably be upwards of 5 years for some of the larger
operations, and I was surprised to hear him say that it's at
least a year for him on a small mine aspect, but even the EAs
that people are having to do now, Environmental Assessments,
versus an Environmental Impact Statement, they are so broad and
complete evaluations that they cost almost--they're pretty
comparable in time and cost from an industry standpoint, the
bearer of the cost, it takes about the same time and money, and
are you better off doing the EIS in that case.
Mr. Gibbons. Thank you.
Mr. Lewis, what, in your professional opinion, can a miner
do to reduce the cost of producing a metal?
Mr. Lewis. What many companies are trying to do now is to
leave the country.
Mr. Gibbons. That's a bit draconian.
Mr. Lewis. But what many people would like to see happen in
Washington, as I might be so bold as to suggest----
Mr. Gibbons. Could you pull the mike closer so everyone can
hear? Thank you.
Mr. Lewis. What we would like to see is Congress take back
the prerogative of passing the laws. We would like to see the
people that we talk with and that we can deal with and can
associate with be responsible for the laws that are passed.
To have a Federal bureaucracy that we have never even seen
any of the people that are proposing these laws, that we have
no impact on whatsoever when we go to their meetings and we
talk, talk to Mr. Tom Leshendock, and try to make a point with
him, and he's a wonderful fellow, and a good man to talk to,
but he doesn't pass any rules.
He has--I wish he did have a lot of influence, but I don't
think they listen to him either. I mean they're passing laws
that have nothing to do with the reality of here, and that's
really hurt us, hurt us bad, killed us dead in many instances.
Mr. Gibbons. Do you have any specifics, other than the fact
that you go to a heap leaching? What I'm trying to get at is
maybe some specifics other than perhaps reducing the cost of
the delays as Ms. Carpenter has talked about in terms of the
permitting process.
Is there anything you can do to reduce the costs? I mean
you have wages, you have materials that you purchased, you have
capital costs, what can you do today? Let's say tomorrow it's
going to be less.
Mr. Lewis. I think the Crown Jewel mine has been 15 years
in the permitting process. You could pass a law that the BLM
and the Forest Service couldn't take longer than a year. That
would be a reasonable thing that would reduce our costs some.
They are now getting ready to require very onerous and
difficult bonding for smaller companies on less than a 5-acre
parcel. We used to have a 5-acre rule that you could go in and
get a fairly quick permit to go in there and drill your holes,
but if you have to go through an extensive and expensive time-
consuming evaluation, environmental evaluation, that would be a
way to, by keeping those laws out, that would be a way to
reduce your costs.
I've pretty well given up. I hate to admit this, but I've
pretty well given in up trying to drill or explore on
unpatented claims.
I happen to be fortunate in having some patented mines that
I bought forty years ago, so I am still able to operate under
the State regulations, and if you stay under 5 acres
disturbance, why, you can get an exploration program through.
But they are making it so difficult that's not worth the risk
of the investment here.
And another thing that is very, very troublesome is that
they don't just pass a set of laws and then that's it. We have
the 1872 Mining Law up until 1955. That's when they really
started changing it. They changed it then and I can remember
sitting on my bunk at Fort Ord, California. I had been drafted
into the Army. I was getting $90 a month and I was sending $25
a month of that to my attorney in Ely trying to protect my
mining claims from the Forest Service. And that was a difficult
thing to do. I was very fortunate that I wrote a letter to our
then Congressman, and he helped me. And he had to look at the
mineralization and they let me alone then for a while until
they started passing some more laws.
And even with the laws that have just recently been passed,
we have a whole new group of laws coming in, not from Congress,
but from the Federal agencies.
That's a very discouraging thing, because no matter what
law they pass today, you know they're going to want a whole
bunch more tomorrow.
Mr. Ingle. Might I add something to that?
Mr. Gibbons. Yes, Mr. Ingle.
Mr. Ingle. On these other minerals, what does Congress
propose to do, or do they propose to do anything to open those
minerals up economically, because they are a security need for
this country?
We pass these things off as insignificant, but those
minerals, for instance, there were 222 tungsten mines operating
in 1950 or 1952, and there is no way of shouldering the cost
with these other minerals. We have gold and it's kind of on a
pedestal by itself. But these other minerals, we may find out
are essential some day, and we wouldn't have made any
preparations, any more than we did before World War II or
before the Korean War or any other war. We never get ready.
And I would like to know if there is any way to do that, to
make some kind of a law that will require the government to
take notice of these things, and during the war, we had DMEA
and we had all sorts of subsidies to produce these minerals.
Then we have the strategic stockpile, and we sold that off even
when the market was down for mercury and silver and maybe some
other minerals, and we closed other domestic mines. And I don't
see any logic to it, and maybe I'm stupid or something, but I
just can't see it.
Mr. Gibbons. Let me say that I appreciate your insight to
all this, and it is an issue that I haven't an answer for you
at this time, but it's an issue that I will take back with me.
I will do some research on it, and I will get back to you
personally as to your question on this issue, because I think
it's very important that we look down the road in a projection
of what we're going to need and how much will we need it, and
where is it and how long will it take us to get there.
Because we don't have a strategy to get there, we will do
what you started your comments off with: We will fail to learn
from history what history has taught us.
Mr. Lewis?
Mr. Lewis. Along that line, I'd like to make the note that
Bataan fell because the soldiers were out of the materials to
fight with, not because of superior forces forcing our men out
of their bunkers.
The Federal Government itself was negligent in failing to
supply ammunition and other supplies so our men could continue
fighting. Had they had sufficient supplies, they would probably
still be fighting today.
I was told that much of the ammunition on the Bataan
Peninsula was surplus ammunition that was left over from World
War I. And our government knew war was coming, but they didn't
do anything about it.
Mr. Gibbons. We have the very same issue facing this
country today with regard to our military: The overextension of
our military with operations that have seriously depleted the
munitions stores, the munitions reserves, depleted our ability
to repair engines because we can't get the parts and we can't
get the materials to repair these needed items, and yet we keep
sending our young men and women over there to do a job, and
we're asking them to do a mission that they can't physically do
because we haven't given them the resources to do the mission
with.
And so the questions you have raised and the issues you
have raised are the exact reason why this hearing is necessary
and why it is so very important to hear the testimony and to
take this information back and give it to the Department of
Interior when it comes to their decision about this 3809
proposed regulatory change.
Mr. Ingle. I was one, among one of the first Navy air
squadrons called back to duty for the Korean War, and in the
first month, we had one old airplane and no tools to keep it
flying. It took us 6 months to get one air group supplied, and
when we went to Korea, paint was peeling off the ship, we
couldn't get many of the aircraft off the deck.
The pilots went into the ocean right in front of the
carrier. Bombs went off under our own aircraft, and then they
didn't go off when we wanted them to go on the enemy. I had
13--or 11 guns, .50-caliber guns between two airplanes, and
only one of them fired.
And I had another time when I had six .50-calibers and this
anti-aircraft battery wasn't firing, but when I fired, they
started firing, and I had one gun. And these things are
rockets, we couldn't tell where they were going. It was pretty
rough. And I don't want to see that again--I don't want my--my
son's too old now, maybe my grandson will have to go, but I
think he deserves better than that.
Mr. Gibbons. Well, ladies and gentlemen, this is exactly
the purpose of this hearing, and this is why it's so critically
important to understand the significance of mining not just to
Nevada, but to this Nation, to the national security.
I did want to give some time for those people that haven't
been on one of these panels to get a chance to have the
microphone and talk about their issues, but I do want to,
again, thank each of you for your contribution here today.
Thank you for your time and your patience, and any point
that you wish to submit additional information, please feel
free to submit it to the Committee. We will be happy to
assimilate it into the hearing today.
[The information follows:]
Mr. Gibbons. With that I want to thank all of you for your
patience today. Thank you. Ladies and gentlemen, before we call
on those individuals who want to come down and have an
opportunity to speak, I would ask that you come to the desk
over here to see Daniel, Daniel Grimmer with our office, if
you'd raise your hand.
We need to have your name and address for the record so
that we can respond. If you will just give it to him, and then
one at a time or two at a time, remember, we need to keep this
within a reasonable length of time or we will be here all
night. Everything that needs to be said will have been said by
everybody by the time we're finished here, so I appreciate
that.
And also Madam Reporter, for the record, Senator Reid and
Senator Bryan have submitted statements, and we'll incorporate
their statements at the beginning of the record for purposes of
our hearing today.
What we will do to in order to maximize the time here,
we'll have to set some ground rules, because we only have the
room until 5 p.m.
What I'd like to do is, if you can, use the mike here.
We'll put one person there and one or two here, and after each
person has testified--and please try to limit it to one or two
minutes. I know that sounds like a short time, but again, it
ought to give you an idea to be very succinct and try to wrap
things up and put your statement into the record, so just pick
a microphone, and when you start, give your name and address
for the record, and we'll go from there.
Gentlemen, you're the first up, so please.
Mr. French. My name is Gregory French, Reno.
I want to talk about the effect of Federal fees and State
taxes on the mining industry as well is the rural economies.
Many here have already talked on the effects of the fees on
the mining industry. I am going talk a little bit on the effect
it has on small towns. We need to know the importance of--I'm
sorry--we all know the importance of the net proceeds tax on
rural counties and school districts. Senator Rhoads gave a good
example of that.
In times of a mineral price depression, the bottom has
dropped out for the mining companies right now, and the taxes
they produce.
While the added fees that are going in, that are proposed,
the added regulations are just the piece de resistance for
Interior Secretary Babbitt. His war cry has been modified after
the countercultural philosopher Cheech Marin: We don't need no
stinking mines.
Rural school districts are seeing the pinch now. Many
require State funds, instead of--require more State funds and
less if the trend continues, less State money for new
initiatives, and more money will be taken from the general fund
and given to the school districts. In many cases, reduced money
will require school districts to cut teachers and become non-
compliant with State standards.
In addition, additional royalties and fees will make mining
unprofitable and therefore reduce taxes and tax structures for
the counties and small communities. The intense lobbying
against the rural counties for higher Federal taxes, fees,
duplicate regulations by the environmental groups like the no
mineral policy center are all targeted toward rural counties in
effect.
These environmental corporations do not care about the
people in rural Nevada. As Dr. Myers said, we're just a small
sliver. They are pushing their agendas to stop mining, lock up
Federal ground from the public, and raise more money for their
funds instead of caring for the rural counties. Thank you very
much.
Mr. Gibbons. Thank you. Very timely. Thank you very much.
Gentlemen, you may choose which one goes first.
Please identify yourself. The floor is yours.
Mr. McLane. My name is David McLane, and I am what the
State of Nevada terms a displaced miner. I'm here today to put
a face on what happens when an industry reacts to external
pressures to lower their cost of doing business.
Twenty years ago, I graduated with a bachelor's degree in
geology. Twice in the last 18 months, I have been laid off from
companies that have been forced to cut their costs in the face
of an ever lowering price in the commodity they produce.
I was unemployed for five months after the first layoff.
For the last nine years I have lived in Winnemucca. Prior to
1998, Winnemucca's growth rate was approximately 15 percent and
we were truly a boom town. In 1996 we made it on the list as
the ninth best small town to live in in America.
Today Winnemucca is a much different place to live. In a
community whose population totals approximately 12,000, there
are over 160 homes on the market. Many of them have been for
sale for over a year. Our unemployment rate since December of
1997 has almost doubled, and our community today is desperately
trying to reinvent itself in regards to economic
diversification.
I myself have been forced to leave behind a career that I
truly love, and at age 43 I'm trying to embark on a totally new
one. Yesterday, the stock market dropped over 200 points in
reaction to the CPI going up the highest it's been in the last
9 years. The price of gold dropped almost $2. Clearly the risk
of inflation and increased interest rates is not affecting our
commodity.
I ask you to please consider the effect that additional
fees and royalties will have on the thousands of people who
live in northern Nevada whose lives are so closely linked to
the health of the gold mining industry.
Thank you Congressman Gibbons, for holding this hearing and
giving me the opportunity to talk.
Mr. Gibbons. Thank you very much.
Mr. Wilsey. Good afternoon, Congressman Gibbons. My name is
Cy Wilsey. I am the U.S. Land Manager for Homestake Mining
Company. I am also the Public Lands Committee Chairman for the
Nevada Mining Association.
I'd like to make just a couple of quick points. As you
heard earlier, there are plus or minus 150,000 active mining
claims in Nevada today. As Mr. Parratt spoke, that takes
approximately $15 million per year out of the exploration
budget for the companies that are active here.
To put that in a little clearer perspective, that would be
probably about 300 geologists per year for the sixth month
field season. It could be equated to 1,500 to 2,000 drill
holes, and for the benefit of Dr. Miller and Dr. Myers, that
doesn't include reclamation.
To the 8 percent gross royalty that Dr. Myers spoke about,
that would be probably, if not certainly, one of the highest
mineral production royalties of any country in the world that
has an appreciable mineral production record. With that,
existing mines today probably would continue to produce. It
most certainly would force them to raise their cut-off grade.
That would be mean that they would leave lower grade
materials in the pit walls or they could not recover some
materials, and without the higher grade materials, they
probably could not, probably, go back and get that.
Most certainly 8 percent royalty is going to kill
exploration. You know, we are the research and development arm
for the mining industry, and that's going to be gone when the
existing mines are mined out, as they will be. Every one is a
finite resource.
Those jobs and this country's expertise will be going
somewhere else in the world.
Thank you.
Mr. Gibbons. Thank you, Cy.
Yes, sir.
Mr. Piquet. Thank you, Congressman. For the record, my name
is Tibeau Piquet. For the record, I'm the past Humboldt County
Commissioner and the present State chairman for the People for
the USA, and a point of clarification: We used to be People of
the West, but with government regulatory oversight encroaching
on our private lives and private property, we have people in
Rhode Island and now Maine. So we really are People for the
U.S.
This is not about ranching or mining alone. It's about
access. In a State like Nevada where more than 83 percent of
the land is owned by the government, access is critical.
Recreation has long been a great alternative to economic
activities such as mining and logging, but now you the
recreators, and the American public are in the same boat
because environmentalists are rapidly getting disillusioned
with recreating. It attracts crowds; it requires infrastructure
ski lifts, accessible campgrounds.
Encouraged beautiful landscapes rather than authenticity or
biodiversity are the ecological goals. It brings sprawl.
Throughout the years, green groups and Federal agencies held
tourism out as a replacement for western communities where
mining, logging and other natural resource industries have been
eliminated.
Now that those industries are disappearing, they have
changed their minds about tourism. Chief Don Beck of the U.S.
Forest Service gave a speech recently stating there was 70
percent less timber harvested now and that the recreation
industry could be next. The side boards are set up.
So, we can't cut on it, can't dig on it, can't graze on it;
and now we can't even play on it. The new U.S. Forest Service
road policy will close thousands of miles of road and turn
approximately 31 million acres into de facto wilderness.
Our public lands policy needs common sense and balance.
Access is for everyone, not the few, and it's being lost
incrementally so no one is taking notice. Access is the
foundation of mineral exploration and quality of lives in rural
Nevada. It's part of our freedom.
I appreciate the chance to talk. Thank you.
Mr. Gibbons. Thank you very much.
Yes, ma'am.
Ms. Struhsacker. Mr. Chairman, thank you for this
opportunity to chat with you this afternoon. My name is Debra
Struhsacker. I am an independent environmental consultant here
in Reno, and also a member of the Women's Mining Coalition. I
would like to share with you some information today on the
abandoned mines issue with the thought that it might be useful
to you.
About a year go the National Mining Association retained me
to do a study on successfully reclaiming abandoned hard rock
mines. The findings of the study suggests that there can be
enormous synergism between a vibrant and active mining
operation and reclamation of nearby abandoned mines.
I'd like to suggest that that study--one of the
implications from that study is that fees are not the only way
to a achieve reclamation of abandoned mines. That if we could
improve the atmosphere for mining in this country and remove
some of the institutional barriers that the Clean Water Act,
CIRCA, and other liability considerations and some of these
other existing laws create, that there could be ways to
incentivize the industry to actually achieve an even greater
level of synergism.
So that although it may be necessary to create an abandoned
mine fee or royalty, that there could be other ways of using a
very active mining operation to reclaim adjacent lands.
We found from this study that the types of improvement that
mining companies have realized include water quality
improvement, cultural resource preservation, wetlands
enhancement, and if you think it would be useful to you, I'll
make sure you get a copy of the study.
Mr. Gibbons. Would you, please.
Ms. Struhsacker. Yes, sir. Thank you very much.
Mr. Snow. I am Charles D. Snow. I'm a consulting geologist,
a graduate from the University of Utah, 1952, and registered
professional geologist in Wyoming. And I certainly appreciate
the chance, Representative Gibbons, to testify here today.
After I was retired, I did quite a bit of poking around,
did a little consulting, and a lot of prospecting. To cover a
decent-sized prospect for, say, a gold anomaly takes about 100
claims. I was expending about $10,000 a year taking ground
samples, soil samples, or trace minerals to identify a possible
drilling target.
My samples were encouraging and it was going forward quite
well, but then $10,000 a year doesn't sound like very much, but
that's all my budget could afford. The government then put on
this $100 per claim, or $5 an acre for those claims that I had.
Well, I could cut back to 10 claims, but that certainly didn't
cover the prospective area that I was looking at. So I dropped
out, and in doing so, there are now about a month or month and
a half of time taking samples, living in motels, paying for
also the assay work, only a few hundred samples, but the
assayers don't get to assay them now. These are now gone.
Regulatory agencies have increased the time that it takes
to get permitted on mines, and this cost and the time value as
money is one thing that really needs to be addressed. Thank
you.
Mr. Gibbons. Thank you, Mr. Snow.
Yes, sir.
Mr. Prenn. My name is Neil Prenn. I'm president of Mine
Development Associates, a small consulting company that employs
12 people here in Reno.
I believe that we all want to be fat and happy and not have
to worry about disturbing the earth or causing any kind of
disturbance in our own back yard. We would like to have our
cake and eat it. The mining industry is, by its nature, a dirty
industry. It disturbs the earth. It produces everything we
need.
I believe that this country is doing everything it can to
not have this industry. I believe that the purpose of the BLM
was to promote multiple use of our public lands. I don't see
that multiple use is being thought about anymore. I just wanted
to clear up one thing in that the Fury was mentioned here, that
it was a bankrupt company.
We worked on the reclamation there. We got partial release
of the bond for physical things like dozing, but we couldn't
agree with the BLM, or excuse me, the Forest Service to get
partial release of the bond while the heap was being cleansed.
So as a contractor, we could not take the risk of getting
no money for doing the work, and that's what the Forest Service
would have enforced on us. And we believe that we had test work
to show that we could have cleansed the heap with the bond
money that was there.
Mr. Gibbons. That was a very important point you made, so
in essence, what you're saying is the Forest Service stopped
you from reclaiming the mine.
Mr. Prenn. They stopped us from reclaiming because they
made us, a contractor, take the risk.
Mr. Gibbons. Okay, thank you very much.
Yes, ma'am.
Ms. Mason. Congressman Gibbons, my name is Susie Mason, and
I am the vice president and manager of land and administration
for Pittston Nevada Gold Company. It's a joint venture between
an Australian company and a U.S.-based coal company. We're
doing only exploration work and acquisitions work in the United
States so we have no operating mines. The capital to support my
company is coming from Australia.
I can say without any reservation at all that the
imposition of additional fees and royalties, and making the
environment less friendly in this country is a disincentive to
exploration in the United States. And I can say that without
any hesitation whatsoever. I am a member of the Women's Mining
Coalition as well, and one of the things that we tried to tell
the Congressmen and the Senators when we went back to
Washington was that mining has changed. We use the best of
technology now. We have the highest standards in the world, and
the world has turned to us and adopted our standards, and we
have done everything that we could to take this industry from a
pick and shovel--although that's a great origin and a great
history, to a very environmentally responsible industry, and I
don't know how much more that we can take in terms of pressures
on this industry and continue to function.
It seems as though every concession that we make, every
improvement that we make; every efficiency that we put in to
place gets undermined by yet another level of bureaucracy,
another layer of regulations, another pile of things to go
through, another hearing to come and testify to, which I'm
grateful for, but that takes time away, in a small group.
My company only employees about five people, and that takes
time away from the job we're trying to do, which is to find
more mineralization. We are responding to laws that are being
proposed, we're responding to regulations that are being
proposed. Everywhere we turn there is another emergency that
takes us away from the real job that we have, which is to try
to find mineralization and to keep this country going.
If it's not grown, it's mined, and that's true; and I
really believe that the war that is going on is not just
Kosovo, it's been going on for quite some time and it involves
the natural resources sector of this United States economy.
Mr. Gibbons. Thank you very much.
Yes, sir.
Mr. Shaw. Thank you, Congressman Gibbons, for this
opportunity to speak to you.
My name is Chris Shaw. I'm a geologist working in the
mining industry in Winnemucca, Nevada. I'm also State chairman
of the wilderness committee for the People for the USA.
My job has been directly affected by the high price of
governmental regulation in addition to the low gold price. I
formerly worked at a low grade open pit gold and silver mine as
an exploration geologist. As a result of the low gold price,
now I'm working as a production geologist at a high grade
underground gold and silver mine.
The additional cost of production such as implementation of
the revised 43 CFR 3809 BLM Surface Management Regulations will
cause more layoffs in heavily mining-dependent rural northern
Nevada. Our community is already burdened with many people out
of work from the downturn in the gold mining industry. Any
further increase in cost to our industry in northern Nevada and
small towns in Nevada heavily dependent on gold mining places
undue and unfair burdens on our citizens and employers, causing
more layoffs than would otherwise occur.
The current 43 CFR 3809 regulations are sufficient to both
protect the environment and still provide the highest paying
wages in rural and small town Nevada.
Thank you.
Mr. Gibbons. Thank you, Chris.
Yes, sir.
Mr. Hinkel. My name is Randy Hinkel, Congressman Gibbons.
I'm a consulting geologist from Carson City and also an
environmental manager.
Several people have alluded to the liability issues and
things like that, with cleaning up old mines. I think that--and
I am going to be very short--I think that if the government
would give the people a tax credit to go after these things,
they could produce both minerals from them and clean up some
environmental eyesores that people won't touch right now
because they are totally afraid of the liability issues
involved with them.
And I think you could apply that to chemical Superfund
sites and all kinds of things in the current environmental
scheme of things. I think it's more command-driven instead of
offering people incentives to take care of these problems.
Thank you.
Mr. Gibbons. Randy, that was an excellent statement for
it's brevity and what you went after, because it's an
interesting proposal and one which is very interesting to hear.
Yes, sir.
Mr. Kennedy. Thank you, Mr. Chairman.
I'm Larry Kennedy. I'm exploration manager with Battle
Mountain Gold based here out of Reno, and I just want to
address my comments mainly toward the royalties and some
proposals that have been discussed, mainly to point out that
hard rock mining of gold, copper, and other minerals is much
different and can support a much smaller royalty provisions
than we see with, for example, oil, gas, coal, and industrial
minerals.
I'm concerned when we hear some of the proposals that may
be proposed, that they may be based on different models, for
example, other than net proceeds.
And just to bring up another point along this line, the
mining business, especially in a rural environment, part of the
capital costs set up infrastructure that is very important for
the economic development in these areas. Comments, for example,
of subsidies from the mining industry I find especially
ludicrous with respect to these industries.
In our industry, we don't have the option of moving a mine.
A mine is where you find it. It's dictated by the geology, and
this is where we need to put the process and the facilities.
If I could make one other comment: One of the reasons that
we see this flux of exploration money and development money
going overseas is the uncertainty in permitting, and the
uncertainty in being able to develop deposits; and certainly to
that end I want to applaud your efforts, Congressman Gibbons,
and those of some of our other legislators in helping us in
overcoming some of those uncertainties.
Thanks.
Mr. Gibbons. Thank you very much, Larry.
Well, did we save the best for last?
Mr. Collord. Maybe, maybe not. My name is Jim Collord, and
I've sat through this hearing and haven't heard much about an
issue that is of extreme importance. I'm the environmental
superintendent of Cortez Gold Mine. I've been a third-
generation miner, and there is an issue that is on the radar
screen about that far away and that is the Crown Jewel issue.
And it relates to the mill site issue that was alluded to
earlier. It's such a severe issue for the mining industry that
basically you could shut this industry down in this State on
public lands. Even some of the mines that have a lot of
operations on private land also have waste rock dumps on
unpatented lode claims. It could shut them down.
This issue is so severe, so critical, and it's in
Congress's hands right now. And my recommendation to you,
Congressman, is to go back and monitor closely and take care of
this industry. Do not let this issue kill it.
Mr. Gibbons. Jim, let me say that Slade Gorton is trying to
put language into the supplemental appropriation bill that will
deal with this very issue that you're talking about because
many of us see it as a very critical issue.
I mean it is a bomb with a short fuse, and so we need to
work quickly on that, and we're hoping that we'll be able to
keep it in the supplemental appropriation as well.
Mr. Collord. Okay. My only comment on that is just make
sure the language covers the entire mining industry, that it's
not project-specific. It is critical to Barrick, it's critical
to Cortez, it's critical to every mine.
Mr. Gibbons. Jim, if you have suggested language----
Mr. Collord. I've not seen the language that is in there,
but I understand it is specific to Crown Jewel, which is great,
they deserve that decision to carry forward, but be aware of
the impact that it could have on the rest of us.
Mr. Gibbons. Would you send our office a letter expressing
your concerns so we can forward that on?
Mr. Collord. Hopefully the Kosovo spending bill will be
done and the language is proper.
Have you seen the language?
Mr. Gibbons. Not yet. I've heard about it, but I haven't
seen----
Mr. Collord. Nobody seems to know what it says.
Mr. Gibbons. Well, they're still in their conference
committee. I've watched it until I turned blue.
Mr. Collord. But understand, this is not the way to
regulate an industry, and it has to be monitored.
Thanks.
Mr. Gibbons. Absolutely, thank you very much.
Ladies and gentlemen, the record for this hearing tonight
will be open for a period of 2 weeks within which anyone can
submit a comment. You want to send them to Cherie Sexton, U.S.
House of Representatives, Room 1626, that's the Longworth House
Office Building, Washington, DC 20515, and we'll give you that
address if you didn't have a chance to write it down. Not many
of you are stenographers. I spoke a little fast. But we have
that address up here, and we will be happy to provide it for
you at the end of this hearing.
Let me wrap this up and bring it to an end because we're 15
minutes beyond our IOU for the county here in this building.
I want to assure you that everyone's presence here today is
significant. Today is a Saturday, and you came out of your
houses. You could have gone fishing, you could have gone to do
a number of other things with a whole lot more fun than sitting
through a 3-hour hearing on this issue, but it's so significant
that you took the time to come here, and I want to applaud each
and every one of you for your dedication and your contributions
here today.
And because of today's hearing and the importance of the
testimony and the facts that were brought before this
Committee, I am going to go back to Washington and ask the
House Resource Committee and the chairman of the Committee,
Representative Young from Alaska, to hold similar hearings
across America in this country on these issues to educate not
just Congress, but to educate the American people as well,
because of the 435 Members of Congress, directly or indirectly
395 of them have some relationship to the mining industry.
It is pathetic to go to Congress and not have them better
educated in the importance of this industry to their own home
districts. So if we had 395 supporters out of 435, believe you
me, we could make some strong headway in doing what's right for
the industry, doing what's right for Nevada, doing what's right
for America.
With that, ladies and gentlemen, if there is no other
testimony, I will close the hearing, and again, thank you very
much.
[Whereupon, at 5:20 p.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows.]
BACKGROUND MEMORANDUM
John Rishel, Legislative Staff
Date: May 13, 1999
Subject: Subcommittee Oversight Hearing on ``Effect of Federal
Mining Fees and Proposed Federal Royalties and Fees on State
and Local Revenues and the Mining Industry''
The Subcommittee on Energy and Mineral Resources is
scheduled to meet on Saturday, May 15, 1999 at 2 P.M. in the
Washoe County Commission Chambers at 1001 East 9th Street,
Building A, Reno, Nevada to hold a hearing on ``Effect of
Existing Federal Mining Fees and Proposed Federal Royalties and
Fees on State and Local Revenues and the Mining Industry.''
BACKGROUND
The Subcommittee on Energy and Mineral Resources is holding
this oversight hearing to gather factual information on the
effect of existing Federal fees, such as the $100 per claim
holding fee and proposed Federal fees, such as royalties, on
the mining industry, state and local economic activity and
revenues. The Committee also wishes to gather information on
the probable effect of various existing and proposed Federal
fees on trends in our nation's domestic mineral exploration,
production and reserves.
Mining is a basic economic activity which supplies
strategic metals and minerals that are essential for
agriculture, construction and manufacturing. A recent study by
the National Research Council concluded that one of the primary
advantages that the United States possesses over its strongest
industrial competitors, Japan and western Europe, is its
domestic resource base. The domestic mining industry provides
about 50 percent of the metal used by U.S. manufacturing
companies.
The United States is among the world's largest producers of
many important metals and minerals, particularly copper, gold,
lead, molybdenum, silver and zinc and still has substantial
domestic reserves of these metals. Twelve western states
containing more than 92 percent of U.S. public land account for
nearly 75 percent of U.S. domestic metal production. Thus, much
of the United States future mineral supplies will likely be
found on public lands in the West.
The Committee selected Reno for this hearing because Nevada
is an important public lands mining state, with 87 percent of
Nevada's lands owned by the Federal Government and mining
accounting for approximately 9 percent of the Gross State
Product. Precious metals mining constitutes the majority of
economic activity in the north central and northeastern parts
of Nevada. Consequently, any detrimental effects of Federal
mining policy are definitely going to impact this important
mining state.
A major public lands mining issue is what constitutes a
fair share of revenue for the Federal Government from a mineral
deposit on public land. Presently, the Federal Government does
not levy a royalty or other fee on minerals extracted from
public land. Many critics of the general mining law say that it
is only fair that the Federal Government charge a royalty or
other fee on minerals mined on public lands. Some have even
advocated that a fee be levied on minerals taken from former
public lands which have been privatized over the years through
the mining law. Suggested mining royalties or fees range from 3
percent of net proceeds to 12.5 percent of gross proceeds.
A Federal royalty on hardrock mineral deposits is more
complex than it seems at first glance. About 80 locatable (i.e,
claimed under the mining law) mineral commodities and a wide
diversity of mineral deposit types occur on public lands.
Unless care is exercised in determining a royalty, mining of
some commodities and many lower-quality mineral deposits will
be uneconomic. For example, a high gross royalty penalizes
producers in high cost regions. Also, costs of production are
not equal for all commodities. For example, smelting, refining
and ore transportation costs at some gold mines consume less
than ten percent of the metal's selling price, whereas for zinc
mines these costs account for about 65 percent of the metal's
selling price. A high gross royalty based solely on the
economics of mining the nation's richest gold deposits makes
zinc mining uneconomic.
The Federal Government profits from the existence of a
mineral deposit somewhere beneath public lands only when that
deposit is found and developed. For a royalty to generate the
maximum return on the ``public's assets,'' it must not reduce
exploration or mining activity.
A royalty must be based on the ability of most mines to
pay--not the ability of one or two of our country's most
profitable mines to pay. Unlike private landowners, the Federal
Government receives income in the form of taxes from mining on
public lands. If a Federal royalty is imposed which causes many
mines to close and others never to be developed, the government
will lose hundreds of millions in personal and corporate income
tax revenues--a loss greatly exceeding any revenue gains from
the royalty.
State and local tax revenues can also be severely impacted
by a Federal mining royalty. Federal royalties are deductible
from the base on which many State and local taxes are levied,
and State and local governments also share in tax losses caused
by reduced mining activity. A state like Nevada could lose
millions in tax revenues due to the negative impact of a high
Federal royalty.
The experience of the British Columbia provincial
government with mining royalties provides an excellent
practical example of the severe impact of a high, government-
levied gross royalty. British Columbia imposed a 5 percent
gross mining royalty in the early 1970's. Grassroots
exploration ceased, mines closed and new mines were not
developed. More than 5,000 jobs were lost. This ill-conceived
gross royalty was quickly repealed once its devastating effect
became obvious.
Evidence is mounting that the Federal $100 per claim
maintenance fee is a prime culprit in a protracted downward
trend in U.S. mineral exploration. The $100 maintenance fee was
first authorized via a ``rider'' on the FY 93 Interior
appropriations bill. The fee was then slightly modified and
extended through FY 98 in the 1993 Omnibus Reconciliation Act.
This fee was again extended through FY 2001 in another
appropriations rider on the FY 99 Interior appropriations bill.
The current $100 fee is not competitive with similar fees
on Federal acquired lands, state-owned lands or private land.
At current rates the fees discourage mineral exploration on
public lands, particularly during the early stages. The early
stages of exploration require large land positions (typically
around 30,000 acres or 1,500 claims) to reduce risk to
acceptable levels. Historically, initial exploration is often
conducted by those least able to bear the cost of this fee,
small companies, often called junior exploration companies, who
raise high risk money from investors hoping for the big strike.
Obviously, long term imposition of a high fee discourages
initial mineral exploration and significantly escalates the
cost of early stage high-risk exploration which has serious
ramifications on this country's ability to replace critical
domestic reserves of metals as current reserves are mined out.
A company can avoid the maintenance fee by simply shifting
exploration, primarily at the grassroots or early stage, from
high cost U.S. public lands to countries like Canada, Mexico or
Chile which seek to attract exploration rather than levy high
tolls on this activity. Continuation of these trends in mineral
exploration raises serious concerns that as known domestic
reserves are exhausted, significant declines in U.S. mineral
production will occur.
Thirteen witnesses are scheduled to testify, including
three elected officials or their representatives, three state
officials, the President of the Nevada Mining Association, two
representatives from environmental groups and four
representatives from the mining industry. For further
information, please contact Bill Condit at x59297 or John
Rishel at x60242.
------
Statement of Greg D. Loptien, Sparks, Nevada
Dear Representative Gibbons:
I am writing this letter in the hope that my views,
concerning issues discussed or touched upon at the Oversight
Hearing in Reno come to your attention. I am uncertain whether
or not you can accept letters concerning these issues as part
of the hearing process; regardless I will attempt to briefly
state my views.
Before I begin allow me to express my appreciation for your
efforts to fully understand the issues that face the mining
industry in this country, for the opportunity to allow members
of the mining community to express their views and for your
past and continuing support of our and the nations industry.
Too often the views of the industry are not relayed to the
public or are misrepresented.
The current depressed world market for metals and
industrial minerals has been devastating to this nation's
mining industry. Over the last seven years the mining industry
has been fighting an uphill battle against the Democratic-
controlled administration, in particular Secretary Babbitt.
Anti-mining environmental extremist, both within and outside of
the government, are engaged in an all out assault on the mining
industry not to make it a better, cleaner, more environmentally
friendly industry but to kill it. The mining industry has,
albeit sometimes reluctantly, worked diligently to become a
more environmentally sensitive and responsible industry. So
much so that most of the time the environmentalists can only
point at problems that exist as a result of mining practices
that occurred 30, 40 or 100 years ago.
About four years ago I attended a lecture at UNR given by
an author who had written a book on the changing attitudes in
the west. The positive and negative aspects of mining were
touched upon and following the lecture I happened to find
myself standing near the wife of a locally prominent
environmentalist. She was discussing the horrors of mining with
another lady. The other lady stated that she thought that the
mining industry was making strides to ``clean up their act.''
The wife stated ``Deary, you don't understand. We just don't
like them.'' In a nutshell, this summarizes what the
environmentalists are after. They do not care how much the
industry does to ``clean up their act'' they don't want mining!
This is obvious when one considers the contorted logic that was
used by the Interior's Solicitor Leshy and the efforts enacted
to stop the New World project in Montana from ``destroying
Yellowstone.''
With regards to your concerns about existing Federal fees
and proposed fees (royalties) on the mining industry in the
U.S. I would like to provide the following comments. The
current BLM management fees are essentially a rental and have
placed a burden on the mining industry that in recent years has
become almost a hardship. The mining industry gets nothing for
this management fee and the monies collected, while it is my
understanding, have not gone to rehabilitation of abandoned
mine lands. One positive aspect of the ``rental fee'' has been
that many bogus and fraudulently held claims disappeared from
the books opening up more land for legitimate exploration.
Mining companies would prefer to put this ``rental'' money into
the property (and this generally means into the pockets of
local/rural contractors who perform tasks such as drilling,
road building etc.) and thus progress their evaluation of the
lands mineral potential. I believe a more equitable and
workable solution to the management fee situation would be to
allow the companies/individuals to select either ``rental''
payment in whole or part for the land claimed. Should the claim
holder choose to invest the money into the ``ground'' then they
must demonstrate, through documentation, a dollar value of work
performed on all or a portion of the claims.
The issue of proposed royalties from revenues from mineral
ventures is one of extreme sensitivity in the mining community.
And well it should be as it stinks of Medieval times and the
royalty claimed by the Kings from work done by peasants. The
Federal Government gets its share of the profits from taxes
levied against the mining companies and since the government
did not participate in any of the risk taking to find, develop,
mine and refine the minerals it should not get any royalty. One
of the biggest proponents of a mining royalty in the Senate was
Senator Bumpers who, if my memory is correct, pushed
legislation that allows the Oil industry (a big industry in his
state) to pass on the cost of their royalty fees to the
consumer. Rather a two-faced stance if you ask me. I find it
interesting that in the past decade the explosion of mining
ventures worldwide was largely due to the removal of onerous
royalties required by many nations and the adoption of a United
States-style mining laws. Royalties, such as those proposed (8-
12 percent gross revenue to 2-8 percent net revenue) would have
a devastating effect on the U.S. mining industry and only the
most profitable deposits could hope to survive. The loss of tax
revenue to the Federal Goverment from mines put out of business
by a royalty would, in my opinion, far exceed the revenues
taken in by the royalty. Again, it is my belief that proponents
of a royalty do not wish to generate additional income for the
Federal coffers as much as they desire to adversely impact the
mining industry.
Of particular concern to me regarding any changes to the
mining laws and regulations is the impacts that these changes
will have on rural communities. While I live in Sparks I do
spend the vast majority of my working days in the small rural
communities of Nevada. I see how important mining jobs are to
rural Nevadans and I see the benefits that these folks get from
the mines in more ways than a pay check or revenue for the
county. Spouses of mine employees are doctors, nurses,
teachers, coaches, child care providers, tutors, school board
members, scoutmasters, firemen, ambulance drivers, EMT's,
county commissioners, sheriffs, etc. These people provide vital
infrastructure support in these communities that are taken for
granted in the larger cities. Mines not only supply jobs to the
people in these small towns but they also routinely provide
scholarships to students to further their education, provide
necessary and expensive engineering and environmental
assistance for such things as waste water treatment. Some time
the mines are the only nearby source for emergency healthcare
(EMT's) or ambulances. Mining companies also routinely
participate and fund development or rehabilitation of riparian
areas working in cooperation with organizations such as Ducks
Unlimited and the Rocky Mountain Elk Foundation. Barrick Gold
(in Elko) and Magma, now BHP, (in Ely) fronted substantial cash
to ensure the construction of High Schools in both of those
towns. None of these services, activities or gifts have ever
been provided by an environmental group and if mines are run
out of business the burden of providing these services win fall
on the taxpayers of the state.
Comments concerning the development of recreational and or
tourist attractions/destinations in rural areas that might
offset the loss of mine jobs was of interest to me. I grew up
in Colorado and as you are aware that state spends a great deal
of time and money to promote tourism. Tourists flock to
Colorado to see the beautiful scenery and to ski at the large
resorts. The locals who do not own shops or restaurants in
these resort areas work for minimum wage as clerks, cooks,
waitresses, maids, busboys etc. and can not afford to live in
the resort communities. For example, people who work at Vail,
Colorado can not afford to live there and must commute from the
towns of Eagle, Wolcott, Avon and Gilman. The small community
of Dillon, where I used to live is largely a community of
apartments that house the people who work at Breckenridge,
Keystone, Arapahoe Basin and Copper Mountain ski resorts.
Tourism may be more environmentally friendly but it does not
provide for much unless you own a business marketed to the
tourist. Tourism is a fickle sort of industry and not every
rural area fits the criteria to make it a thriving resort or
destination. Tourism is no more reliable than mining for
longevity and does not pay anything near mining wages.
Several other issues, not touched upon at the Hearing, that
I believe negatively impact on the mining industry or could be
implemented to both bolster the industry and reduce
environmental impacts are:
Equalize the cost of production from foreign-owned
overseas mining companies with those of the U.S. that have to
bear the cost of regulatory and environmental laws. While many
U.S. firms implement U.S. level environmental standards at
their overseas operations many other foreign companies do not.
Just as the U.S. does not import agricultural products that do
not meet U.S. standards then also the U.S. should not allow the
importation of metals from mines that do not follow U.S.
environmental standards.
Current U.S. laws allow small, but vocal activist-
groups to stall large multi-million/billion dollar projects for
years with trivial lawsuits. This practice is even used against
the Federal Government, as evidenced by a Reno Gazette-Journal
article on June 9, 1999. In this article a small activist
group, the Southwest Center for Biological Diversity, had filed
a lawsuit against the U.S. Fish and Wildlife Service to force
the listing of the Rio Grande Cutthroat as an endangered
species. The article states that this group ``has filed about
100 lawsuits'' in the last four years. A similar situation
occurred with the Crown Jewel mine in Washington and is on-
going with the Carlotta Copper project in Arizona (a new mine
proposed between two exiting mines). Changes that would allow
companies to obtain lost revenue, from the activists and their
organizations, for delayed projects would alleviate unfounded
nuisance lawsuits from groups and individuals who know that
such delaying tactics are on their side.
Perhaps a trade of dollars spent by mining companies
to clean up historic environmental mine problems for management
fees and or taxes could be considered. There would have to be
the acknowledgment that once the company touched the
contaminated site that they would not be permanently liable for
it provided they actually improved the site.
Under the Canadian mining law companies that acquire
claims on Federal ground must turn over all data (maps,
geophysical surveys, geochemical surveys and drill hole logs/
assays etc.) to a central agency (Bureau of Mines ?) once the
claims are abandoned. This does not occur in the U.S. but if
companies where required to release this sort of data to the
U.S. Bureau of Mines/BLM/USGS then less disturbances to the
Federal lands may occur. For example, currently, once a company
has walked away from a property for whatever reason (change of
emphasis by the company, results not encouraging, results do
not indicate a large enough deposit for a particular company,
etc.) then the data acquired from those efforts is archived and
lost to the rest of the mining community. Should that data
become available to the public then subsequent companies that
claim the property do not have to conduct additional drilling,
trenching, road building or other surface disturbing actions
but can build on past efforts. Also properties that appear very
promising on the surface but reveal less promise underground
will be easily identified and passed over by simply reviewing
the agency-held data. A small fee to access the data or small
tax to provide for, maintain and store the data would not be a
burden to companies since they would realize significant
benefit from such information.
I hope that this letter will be of interest and possible use to you
on the subcommittee. I apologize for the length as I did intend to be
as brief as possible. Once again, I am very thankful for all of the
interest in the industry that you have expressed and the support you
have provided for all the years that you have been my representative.
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Statement of Women's Mining Coalition, Reno, Nevada
RE: Comments on the Draft Environmental Impact Statement--43 C.F.R.
3809 Surface Management Regulations for Locatable Mineral Operations
INTRODUCTION
The Women's Mining Coalition (WMC) is a grassroots organization of
women involved with the hard rock mining industry. Our membership is
comprised of women working in many facets of the mining industry
including geology and exploration, engineering, business and
management, mining and heavy equipment operation, equipment
manufacturing, and sales of goods and services to the mining industry.
We have members located from coast to coast in many different states.
The WMC is keenly interested in the Department of Interior, Bureau
of Land Management's (BLM's) current efforts to revise the 43 C.F.R.
Subpart 3809 regulations (``the 3809 regulations'') because many of our
members work at mines located on BLM-administered lands, and a number
of our members work for companies that provide equipment, goods and
services to mines on BLM lands. Based on first-hand experience, many
WMC members can attest to the success which the 3809 regulations have
had in promoting environmentally responsible mining and effective
reclamation of mines on BLM-administered lands.
In a letter dated June 18, 1997 to Mr. Paul McNutt, 3809 EIS Team
Leader, (copy attached and incorporated by reference as though fully
set forth herein) the WMC provided comments to the BLM regarding the
agency's proposal to revise the 3809 regulations. Specifically, we
responded to the issues raised in the March 1997 materials from the
BLM's 3809 Task Force that outlined issues to be considered during the
proposed scoping and revision of the 3809 regulations, and to comments
made by Secretary Babbitt in his January 6, 1997 memorandum to the
Assistant Secretary, Land & Minerals and the Acting Director, BLM. As
discussed throughout this letter, the WMC finds that the BLM's Draft
Environmental Impact Statement (Draft EIS) and the accompanying
proposed rule have failed to acknowledge or consider a number of the
issues, concerns, and questions raised in our June 18, 1997 letter to
Mr. McNutt.
In developing our comments on the Draft EIS, we have relied on our
members' experience in working on mining and mineral exploration
projects on BLM-administered lands, and have given special
consideration to the following:
The strength, comprehensive nature, and proven track
record of the 3809 regulations;
The level of environmental protection and the
reclamation achieved under the current regulatory framework
applicable to mining, including the 3809 regulations;
The lack of any compelling justification or need
identified by the BLM that would warrant modification of the
3809 regulations;
The failure of the Draft EIS to give any consideration
to a number of issues, concerns and alternatives that the WMC
raised during BLM scoping meetings and in our June 1997 written
comments, and the alternatives and issues we feel need to be
evaluated in the Draft EIS but, regrettably, are not; and
Our concerns that the BLM's effort to revise the 3809
regulations not be misused as a political process.
The comments in this letter focus principally on the Draft EIS. The
WMC is submitting a separate letter outlining our comments on the
proposed regulation at 43 CFR Sec. 3809 Rules; 64 Fed. Reg. 6422
(February 9, 1999). In addition to the specific issues and comments
raised in this letter, the WMC fully supports and adopts the comments
filed by the National Mining Association, the Northwest Mining
Association, and the Nevada Mining Association as though fully set
forth herein.
COMMENTS ON THE SCOPE OF THE DRAFT EIS DEVELOPED IN CONJUNCTION
WITH THE REVISED 3809 REGULATIONS
The Draft EIS Fails to Consider Issues and Alternatives Raised
by the WMC During Scoping
The WMC submitted detailed written comments to the BLM in a
June 18, 1997 letter addressed to Mr. Paul McNutt, 3809 EIS
Team Leader. The WMC finds that the BLM's Draft EIS and the
accompanying proposed rule have failed to acknowledge or
consider a number of the issues, concerns, and questions raised
in our June 1997 letter to Mr. McNutt. This is just one of many
reasons why the WMC deems the Draft EIS to be substantively
flawed and procedurally inadequate.
The National Environmental Policy Act (NEPA) and the
Council on Environmental Quality (CEQ) regulations for
implementing NEPA (40 C.F.R. Sec. 1500) and for preparing
documents, such as this Draft EIS, requires the BLM to
acknowledge, track, and respond to issues raised during project
scoping. In preparing this Draft EIS, it appears that the BLM
has ignored its own internal guidance considering comments
received during public scoping. For example, page V-2 of the
BLM's NEPA Handbook (H-1790-1) includes the following
statements regarding scoping:
Scoping the EIS (40 CFR 1501.7, 1506.6 and 1508.25).
The purpose of scoping, generally, is to focus the analysis on
significant issues and reasonable alternatives in order to
eliminate extraneous discussion and limit the length of the
EIS. Among other things, scoping helps: involve the public and
affected agencies early in the process; identify significant
issues to be analyzed as well as alternatives and potential
impacts to be addressed; and allocate assignments for preparing
the document among lead and cooperating agencies . . .:
Page V-3 directs the BLM to consider public input in identifying
the proposed action:
S``l. d. Define Proposed Action. Defining the proposed
action plan is key to subsequent analysis. It is an ongoing
process which usually begins prior to the issuance of the NOI.
In the case of a BLM-initiated proposal, the proposed action
will usually evolve and change based on the results of public
input during scoping and subsequent analysis. (Emphasis added).
Thus, for internal proposals, the identification and definition
of the proposed action is generally more tentative in the early
stages. . .''
The Draft EIS sections entitled ``Alternatives Considered by
Eliminated'' (page 9), and ``Issues and Concerns Not Addressed'' (page
22) make absolutely no mention of the following issues and suggested
alternatives presented in our June 18, 1997 letter to Mr. McNutt and
repeated verbatim below:
``The DEIS Must Include a Detailed Discussion of the
No Action Alternative--The DEIS must include a substantive and
thorough analysis of the No Action Alternative to evaluate the
level of environmental and reclamation regulatory requirements
that would be applicable to future mining projects on BLM lands
with no changes to the 3809 regulations. The No Action
Alternative must consider existing state and Federal regulatory
programs and the BLM's existing authority and recent use of
this authority to modify the 3809 Regulations through policy
guidelines and rulemaking on selected topics (e.g., the
development of BLM policy guidance on acid rock drainage and
cyanide, and new occupancy and bonding rules).''
Comments on the Draft EIS: The Draft EIS is woefully
inadequate in this respect because it does not accurately
describe or consider existing state environmental and
reclamation laws and regulations affecting mining. The Draft
EIS fails to acknowledge and analyze the comprehensive nature
of these existing state regulatory programs, the significant
level of oversight and control authorized by these regulations,
the large number of environmentally responsible mines that have
been developed under these regulations, and current
satisfactory coordination of the state regulatory programs with
the BLM's 3809 regulations.
``The DEIS Must Analyze the Wide Range of Sites and
Mines Regulated Under the 3809 Program. There is an enormous
diversity of climate, terrain, geology, mineral deposit types,
and mining methods represented by mine sites on BLM lands. Both
the Affected Environment and Environmental Consequences
chapters of the DEIS must give full and equal weight to the
many different types of environmental settings and mines, and
provide a separate analysis of the impacts that would occur at
these different settings and mines if the various alternatives
considered in the DEIS were implemented.''
GT3 Comments on the Draft EIS: The Draft EIS describes the
affected environment and environmental consequences in terms of
various environmental resources (e.g., wildlife, vegetation,
wetlands, etc.) on BLM-managed lands throughout the western
U.S. However, it focuses mainly on the gold industry
(principally in Nevada) and largely ignores important base
metal and industrial mineral production on BLM-managed lands
elsewhere in the west. The Draft EIS and economic analyses on
which it is based fail to adequately consider impacts to
different sectors of the mining industry and have thus severely
underestimated the consequences associated with Alternatives 3
and 4.
``The DEIS Must Include a Detailed Analysis of State
and Other Federal Environmental Laws and Regulations Affecting,
Mining--The Affected Environment chapter of the DEIS should
also include a detailed discussion of the many state
environmental and reclamation regulatory programs and Federal
laws and regulations affecting mining. The Environmental
Consequences chapter should assess how these programs would be
affected due to implementation of the DEIS alternatives. In
particular, this analysis should quantify impacts to state mine
land reclamation programs and Federal environmental regulatory
programs for which the states have primacy. Because many of
these state regulatory programs were developed after enactment
of FLPMA and development of the 3809 regulations, the DEIS
should acknowledge the evolution of these programs and the
coordination that has developed between the BLM and state mine
land reclamation and environmental regulatory agencies.''
Comments on the Draft EIS: As noted above, the Draft EIS does
not adequately consider existing state environmental and
reclamation regulations.
``The DEIS Must Include a Detailed Analysis of
Socioeconomic Impact--Any changes to the 3809 regulations that
could result in significant delays in approving future mineral
exploration and mining PLANS could cause adverse economic and
social impacts to mining communities, state economies, and
other stakeholder groups including geologists, consultants,
drilling contractors, analytical laboratories, and restaurant
owners and motel/hotel operators in mining and exploration
areas who derive a substantial portion of their income working
for or providing goods and services to the hard rock mining
industry. The Affected Environment chapter of the DEIS must
acknowledge and quantify the positive social and economic
impacts associated with mining. The Environmental Consequences
chapter must disclose any positive or adverse social and
economic impacts that would result from implementation of the
DEIS alternatives. This analysis must be site specific; a
generic or national evaluation will not adequately assess the
impacts to local communities and regional economies.''
``Additionally, the DEIS must evaluate the economic impacts
that proposed changes in the 3809 regulations would have on
mining equipment manufacturers and companies that provide goods
and services to the mining industry. Many of these companies
are located in parts of the country not typically considered
mining states such as Wisconsin (P & H Mining Equipment and
Nordberg), Illinois (Caterpillar), New Jersey and Texas
(Ingersoll Rand), etc. The continued existence of thousands of
jobs in these states relies on a strong mining industry in the
western U.S. The DEIS must thoroughly evaluate the economic
consequences to these workers and to their state economies
caused by changes to the 3809 regulations.''
Comments on the Draft EIS: As described in more detail below,
the national and generic evaluation presented in the Draft EIS
(especially Appendix E) and the accompanying ``Initial Small
Business and Regulatory Flexibility Act Analysis''
significantly underestimate the adverse economic impacts to
specific communities and regions.
``The DEIS Must Consider Specific Impacts to Notice-
Level Operators--The Secretary's directive to repeal, narrow,
or otherwise modify the 5 acre NOI process will have a direct
and focused impact upon individuals, small operators, and
companies who perform most of their mineral exploration and/or
mine development work under an NOI. The DEIS should include a
separate socioeconomic analysis of the impacts of the proposed
changes upon this groups of stakeholders. Because most mineral
discoveries start as NOI-level exploration projects, the DEIS
must also evaluate the impact that elimination of the NOI
process or delays in the NOI approval process would have on the
rate of discovery, and the impact to local, regional and
national economies as a result of diminished levels of
exploration, discovery, and mine development.''
Comments on the Draft EIS: As described in more detail below,
the economic analyses presented in the Draft EIS (especially
Appendix E) and the accompanying ``Initial Small Business and
Regulatory Flexibility Act Analysis'' are grossly dismissive of
the economic hardships that many Notice-level operators (i.e.,
individuals and small businesses engaged in exploration and
providing goods and services to the mineral exploration and
mining industries) will experience if the BLM's proposed action
(Alternative 3: Preferred Alternative) is implemented.
Additionally, the Draft EIS fails to disclose the adverse
impacts to the rate of discovery and the concomitant increased
reliance on foreign minerals that would be associated with
Alternative 3.
``The DEIS Must Consider Cumulative Impacts--The DEIS
must evaluate the cumulative impacts of any proposed changes to
the 3809 regulations with respect to other connected actions
including but not limited to the EPA's proposed National Hard
Rock Mining Framework, the BLM's recent use and occupancy
regulations, the BLM's new bonding regulations, other EPA
initiatives such as the recent addition of the hard rock mining
sector to the Toxic Release Inventory (TRI) reporting
requirements and potential changes to the RCRA Bevill exclusion
for certain mining wastes, and changes to the Mining Law of
1872 being contemplated by Congress. This analysis should
evaluate the cumulative impacts of changes in the 3809
regulations in conjunction with potential changes in royalties,
fees, taxes, reporting requirements, and a plausible range of
future regulatory developments.'' (Note: the new bonding
regulations referenced above were remanded in May 1998).
Comments on the Draft EIS: The Draft EIS fails to consider
cumulative impacts associated with other Federal rulemaking
affecting mining. In addition to the issues listed in our June
1997 letter, the following new Federal actions are examples of
the regulatory proposals that should be included in a
cumulative impacts analysis: Clean Water Act proposals
regarding Total Maximum Daily Load (TMDL), the Advanced Notice
of Proposed Rule Making to change water quality standards, and
the Department's recent (and inappropriate) decision regarding
the use of mill sites in connection with mining claims.
``The DEIS Must Consider Impacts to Minerals
Availability-- Changes to the 3809 regulations that result in
significant delays in the PLAN and NOI approval processes may
have an adverse impact on the supply of domestic hard rock
minerals. The DEIS should evaluate the impact that revisions to
the 3809 regulation would have upon minerals availability, and
the potential for increased reliance on foreign mineral
supplies. This analysis should consider the balance of foreign
trade payments as a result of decreases in domestic mineral
production. Similarly, the DEIS should consider how the 3809
regulations could be modified to encourage and facilitate
mining on BLM lands and the resulting positive economic effects
of increased mineral exports and decreased mineral imports.''
Comments on the Draft EIS: The Draft EIS fails to consider any
of these issues. In addition to being unresponsive to the WMC,
the BLM's omission of these issues is in direct conflict with
Sec. 102(a) (12) of the Federal Land Policy and Management Act
of 1976 (FLPMA) in which Congress declares that it is the
policy of the United States that:
the public lands be managed in a manner which is recognizes the
Nation's need for domestic sources of minerals, food, timber,
and fiber from the public lands including the implementation of
the Mining and Minerals Policy Act of 1970 (84 Stat. 1876, 30
U.S.C. 21a) as it pertains to the public lands''
The Draft EIS should disclose how the BLM's Preferred
Alternative and Proposed Regulations comply with U.S. laws that
recognize the need for mining, including Sec. 102(a)(12) of
FLPMA and the Mining and Minerals Policy Act of 1970 as enacted
by Congress. The rulemaking process does not grant the BLM the
authority to ignore, repeal, or amend these Congressional
mandates.
The DEIS Should Consider Alternatives to Facilitate
Mining and to Create Reclamation and Environmental Incentives--
Although the Secretary's January 6, 1997 memorandum does not
contemplate changes to the 3809 regulations to facilitate
mineral exploration and mine development or to create
incentives for reclamation and remediation of abandoned mines,
a number of beneficial social and economic impacts on the
local, regional, and national levels could accrue from selected
changes. The WMC believes that regulatory changes to streamline
the review process and stimulate clean-up of abandoned mines
would significantly
enhance mineral exploration levels without compromising the
high level of environmental protection and reclamation success
realized under the present regulatory system. The WMC strongly
urges the BLM to expand the scope of the DEIS to evaluate
revisions to the 3809 regulations to encourage and facilitate
environmentally responsible mining and reclamation of abandoned
mines.''
Comments on the Draft EIS: Alternatives to facilitate
environmentally responsible mineral exploration and mining
would be consistent with Sec. 102(a)(12) of FLPMA and the
Mining and Minerals Policy Act of 1970 as enacted by Congress.
These laws require the BLM to manage the public lands in a
manner that encourages responsible development of the nation's
mineral resources. Neither the Draft EIS nor the proposed
regulations fulfill this responsibility. Additionally, the
WMC's June 1997 comments regarding reclamation of abandoned
mines remain unanswered.
As demonstrated in the discussion above, the BLM has not fulfilled
its obligations under NEPA and the CEQ regulations to respond to our
comments and suggested alternatives. At the very least, the Draft EIS
should explain why many of the WMC's issues and suggested alternatives
were eliminated from further consideration. The Draft EIS violates NEPA
through its failure to assess the many reasonable alternatives that the
WMC and other mining interests proposed during the 1997 scoping effort.
The omission of any mention of these alternatives in the Draft EIS is
such a serious and fundamental flaw that a new Draft EIS and further
public comment is needed to comply with NEPA.
COMMENTS ON THE CONTENT OF THE DRAFT EIS DEVELOPED IN
CONJUNCTION WITH THE REVISED 3809 REGULATIONS
The Proposed Regulations Described in Alternative 3 are a
Solution in Search of a Problem
As stated in the WMC's June 18, 1997 letter to Mr. McNutt,
the BLM must develop a Statement of Purpose and Need. The WMC
recognizes that the Draft EIS includes a statement of ``Purpose
of and Need for Action.'' However, the data presented in the
Draft EIS do not support this statement--especially with
respect to problems described for Notices of Intent (NOIs).
The BLM must justify the proposed revisions to the 3809
regulations. The Draft EIS and other BLM materials furnished to
date provide no compelling reasons to change the regulations.
In fact, an April 1992 BLM study of the 3809 regulations showed
no need for any changes to the environmental or reclamation
provisions of these regulations. The BLM policies and
guidelines developed since 1992 including the cyanide, acid
rock drainage, and surface occupancy guidelines are substantive
contributions to the 3809 program, suggesting the conclusions
reached in April 1992 remain valid. In fact, as discussed
below, the data presented in the Draft EIS do not support the
conclusion that the regulations need substantial revision.
The WMC questions the appropriateness of the BLM's proposal
to revise these long-standing regulations that have been
working well in light of the following: the large number of
environmentally responsible mines developed under the 3809
regulations, the industry's good track record in complying with
these regulations, the requirement at 43 C.F.R. Sec. 3809.0-
5(k) that mining operations comply with all applicable state
and Federal environmental and reclamation laws, and the
complete absence of any actual evidence that the existing
regulations are inadequate.
The Draft EIS Mischaracterizes "Problems" Associated with
Notices of Intent. Throughout the rulemaking process, the BLM
has asserted that one of the principal reasons the 3809
regulations need to be rewritten is due to environmental
problems associated with NOIs. However, the data in the Draft
EIS do not support this contention. To the contrary, the data
presented suggest that problems associated with NOls are
limited in scope and nature.
In describing the environmental consequences of the No
Action Alternative (i.e., no changes to the NOI process), the
Draft EIS states the following:
``Notice provisions could be difficult to enforce
because no reclamation bond is required for Notice-
level activity. The lack of a bond and enforcement
process could result in areas not being reclaimed when
operators leave, although this is not a common
practice. BLM issued about 500 notices of noncompliance
(out of about 29,400 Notices filed for failure to
reclaim, representing 2 percent of all Notices
submitted. (Draft EIS, page 89, emphasis added).
Although the WMC would like to see the mining industry
strive for a 100 percent compliance record, a 98 percent
compliance track record (i.e., a two percent noncompliance
history) hardly constitutes a serious problem. In fact, this
high level of compliance impresses us as a significant
achievement. The BLM should evaluate other alternatives like
better implementation (see the discussion below recommending an
NOI Alternative), to evaluate ways to correct the 2 percent
noncompliance problem. There is no justification for the BLM's
Proposed Action (Alternative 3) for a wholesale rewrite of the
regulations.
Congress Has Already Solved the N0I ``Problem''
To the extent to which a problem existed with the NOI
process, it appears that Congress solved this problem in August
1993 with the vote to eliminate assessment work. In August
1993, Congress changed the requirement for mining claimants to
perform $100 of annual assessment work on each unpatented
claim, and substituted the current requirement to pay an annual
claim maintenance fee. Although many claim owners performed
sound geologic work (i.e., drilling, sampling, geophysical
surveys, etc.) to satisfy the assessment work requirement, some
claim holders did not. Some claimants would fulfill the
assessment work requirement mainly through trenching and other
surface disturbing activities. Mining claimants' need to
perform physical, on-the-ground work to meet the assessment
work requirement (and to create visible proof that the work had
been done) was thus the driving force behind much of the NOI-
level surface disturbance created prior to 1993.
Data compiled by the BLM in Nevada proves that the number
of problematic NOIs has dramatically declined following the
elimination of the assessment work requirement in 1993. In
August 1997, the Nevada State Office of the BLM provided
information to Nevada Assemblywoman Marcia de Braga (chair of
the Assembly Committee on Natural Resources, Agriculture and
Mining) with a table entitled ``BLM-Nevada State Record of
Environmental Problems Associated with Notice-Level Mining or
Exploration.'' This table lists 156 problematic NOI sites in
Nevada. A review of this table reveals that only 10 of the 156
problem NOls were filed in 1993 or later. Five of the problem
NOIs were filed after 1993. The remaining five problematic NOIs
were filed in 1993. An examination of the 1993 NOls would
reveal whether the surface disturbance occurred prior to
August, 1993 when the assessment work requirement was
eliminated.
At the very least, the Draft EIS should be revised to
evaluate the extent to which there are problems with NOIs filed
since 1993.
Inaccurate and Inflammatory Statements in the Draft EIS Should
be Eliminated
The WMC is very concerned about the following inaccurate
and inflammatory statement on page 89 of the Draft EIS:
``Under the existing regulations, if the area occupied by an
operation increases by no more than 5 acres a year, the
operation could remain a Notice-level mine and bypass the Plan
of Operations process. Some operations could become fully
operational mines exceeding 200 acres, be regulated only by a
Notice, and still not have to undergo environmental review.''
Many of our members have worked with BLM offices throughout the
western U.S., and have extensive experience with both the NOI and the
Plan of Operations processes. None of us have encountered this scenario
with any NOI, or in any BLM office. Our collective experience is that
the BLM fully enforces the 5-acre limit on NOIs in compliance with the
current regulations which state the following at Sec. 3809.1-4: ``An
approved Plan of Operations is required prior to commencing:
(a) operations which exceed the disturbance level (5 acres)
described in Sec. 3809.1-3 of this title.''
The scenario on page 89 cited above strays so far from our
collective experience that we are forced to conclude that it has been
created from whole cloth. This apparent excursion from reality
significantly diminishes the credibility of the entire Draft EIS and
calls into question the BLM's intentions and ability to perform an
objective environmental analysis based on fact and sound science
There is simply no evidence to suggest that mines exceeding
200 acres have been or can be permitted with an NOI in the
unlikely event that this scenario accurately describes a
project somewhere on BLM-administered land, it would clearly be
an example of improper implementation of the existing
regulations. If such a project exists, it is inappropriate to
recommend comprehensive changes to the 3809 regulations when
proper administration of the existing regulatory program would
solve the problem. It is equally improper to justify the need
for new regulations based on one, extreme example.
The Draft EIS Should Evaluate a Specific Alternative
Devoted to Changes to the Notice of Intent Process
The Draft EIS describes a concern that NOI-level activities
are occurring in environmentally sensitive areas without
adequate BLM involvement. However, it is the collective
experience of our members that the BLM commonly places
restrictions and requirements on NOI-level activities to
protect cultural resources, riparian areas, wetlands, wildlife,
and other environmental resources. Based on this experience,
the BLM has demonstrated that the agency already has
appropriate regulatory tools and policies for controlling
impacts associated with NOI-level operations. If problems are
occurring, they are most likely due to poor administration and
implementation of the existing regulations--not due to
inadequate regulations. These administrative problems and
implementation inconsistencies probably result from budget and
staffing constraints.
With this in mind, the WMC requests that the BLM evaluate a
fifth alternative--``The NOI Alternative.'' This alternative
should focus on the NOI process and how to use the existing
regulations to address any remaining problems (i.e., non-
assessment work issues) associated with failure to reclaim NOI
sites, or NOI activities in sensitive areas. The NOI
Alternative should determine how increased staffing and budget
levels could achieve more consistent and improved oversight of
NOI activities. We also recommend that this alternative
consider adding a bonding requirement for NOI-level operations.
The WMC finds no justification whatsoever for the BLM's
current proposal for a complete revision of the 3809
regulations. We feel that proper analysis of an NOI Alternative
would show that any real problems with the existing regulations
could be solved with focused, surgical changes to the rule, and
more consistent and complete implementation of the existing
3809 regulations.
Comments on the BLM's Small Business and Regulatory
Flexibility Act Analysis with Respect to Exploration and Nevada
The BLM's Economic Analysis is Seriously Flawed
Many WMC members work as independent consultants, contract
exploration geologists, or are employed by small businesses.
The Draft EIS is grossly dismissive of the adverse economic
impact that the proposed regulations (i.e., Alternative 3)
would have on for small businesses. The WMC finds the BLM's
economic analysis as presented in the ``Initial Small Business
and Regulatory Flexibility Act Analysis'' and the Draft EIS
wholly inadequate. The shortcomings in the BLM's economic
analysis as presented in the Draft EIS would be laughable if it
were not for the importance of this issue and the severe
economic and lifestyle consequences that many of our members
would experience if Alternative 3--The Proposed Action is
enacted. Additionally, many of our members live and work in
Nevada. The Draft EIS and the Regulatory Flexibility Act (RFA)
analysis conclude that the adverse economic impact on Nevada
would be insignificant. This conclusion is wrong. The flaws and
inadequacies contained in the BLM's economic analysis are
described below.
1992 Data Are Not Representative of Today's Industry.
The BLM's Regulatory Flexibility Act (RFA) analysis is
based on 1992 data. The industry has significantly changed and
contracted since 1992 due an increasingly hostile regulatory
and political climate for mining in the U.S., corporate
downsizing and mergers, and reduced metals prices. The dramatic
decline in the number of NOls and Plans of Operation since 1992
shown in Figure I (RFA, page 92) should be sufficient
indication that it is inappropriate to use 1992 information to
model the impact of the proposed regulations on today's
industry.
The RFA Mischaracterizes; Impacts on Exploration
The BLM's analysis fails to consider mineral exploration
and mining as distinctly different industry sectors, and
focuses most of the evaluation on its impact on mining
companies (e.g., companies with operating mining properties).
Moreover, the RFA analysis completely ignores the impact upon
independent exploration geologists who earn their living
working as consultants and contractors to mining companies.
Some of these individuals also own mining claims and pursue
exploration activities on their own behalf with the hope of
leasing their claims to mining companies. These individuals
comprise a significant portion of the exploration industry
sector. As one measure of the importance of this group to the
exploration industry, roughly one-third of the 925 members
listed in the Geological Society of Nevada's recently published
1998-1999 membership directory are described as individual
geologists, geologic consultants, and independent consultants.
Although the RFA analysis acknowledges that exploration is
typically performed by small companies, the underlying
assumption is that most exploration is conducted by companies
rather than individuals:
``Exploration activities are often considered higher risk
activities and may be conducted by relatively less well
capitalized firms. However, a substantial portion of
exploration activities are conducted by major mining companies
which would not be expected to be impacted by changes to the
bonding requirements. Available data does not allow the BLM to
readily distinguish between the employment and financial
characteristics of existing Notices.'' RFA, page 93).
It should be noted that while larger companies may perform a
significant portion of the Notice and Plan level exploration work, many
retain contract geologists to conduct this work.
The RFA Analysis Fails to Recognize Impacts to Individual Geologists as
an Industry Group
The RFA analysis concludes that the proposed regulations
would have an insignificant impact upon the mining industry,
but fails to consider the impacts on the exploration sector as
a whole and on the independent exploration geologist segment of
the exploration sector. The impact of the proposed regulations
is described as ranging from $17,300 to $127,000 on an annual
basis, or $72,140-$533,857 over the period of analysis on each
affected entity (RFA, page 95). According to the RFA, analysis
this impact equates roughly to 1 percent of the 1997 total U.S.
value of locatable mineral production of $17.7 billion, and
about 5 percent of the $1.62 billion estimated value of
locatable minerals production in the western U.S.
This analysis is wholly inappropriate for the exploration
sector of the industry which should be evaluated as a Research
and Development arm of the industry--not a revenue producer.
Moreover, this characterization ignores the impact to the group
of independent geologists that form a significant element of
the exploration sector. WMC members do not look forward to a
reduction in annual income of $17,300 to $127,000, and find the
BLM's characterization of this impact as ``insignificant'' to
be insensitive and offensive. It is highly likely that our male
colleagues who are individual geologists and consultants have a
similar perspective. In fact, it is hard to imagine that anyone
(except perhaps Bill Gates and others in his income group)
would consider such a reduction in income to be without
significance.
The RFA Analysis Ignores the Real Costs Associated with the
Plan of Operations--EA Process
The RFA analysis further characterizes the impact on
exploration activities as an annual cost increase ranging from
0-38 percent, depending upon whether a validity exam and a Plan
of Operations are required. For most exploration projects, the
RFA analysis (page 101) assumes that in most cases, only a Plan
of Operations will be required and that the costs associated
with a Plan of Operations are on the order of $25,000.
Presumably, this cost increase includes preparation of a third-
party Environmental Assessment (EA), although the RFA analysis
is vague on this point. The RFA analysis does not provide any
data to substantiate this cost estimate. Based on our members's
experience, average costs for a Plan of Operations and third-
party EA for an exploration project are substantially more than
$25,000.
Moreover, the RFA analysis completely ignores the time
value of money issue, seasonal constraints associated with
exploration, and the substantial delays typical for the Plan of
Operation/EA process. (The WMC incorporates by reference
herein, information that the industry has recently provided
comments to the Office of Management and Budget that
substantiates that securing approval of a Plan of Operations is
significantly higher than $25,000. See, for example, the March
25, 1999 letter from R. Timothy McCrum to Mr. David Rostker,
Policy Analyst with the Office of Information and Regulatory
Affairs, OMB).
Even if the average cost increase of $25,000 in the RFA
analysis were a valid estimate, it is inappropriate to
characterize this increase as inconsequential. Once again the
RFA analysis has assumed that exploration is being performed by
larger mining companies that are capable of absorbing this cost
increase. The analysis completely fails to consider the
significance of this impact on the individual geologist sector,
both in the context of time and money.
The draft regulations would give the BLM considerable
discretionary authority to require a Plan of Operations for
exploration proposals that would disturb fewer than five acres
(i.e., work that can currently be undertaken by filing a Notice
of Intent). However, the RFA analysis inappropriately downplays
the circumstances in which a Plan of Operations rather than a
Notice of Intent would be required:
``. . . For the most part, exploration activities would not
require an extensive or detailed Plan of Operations due to the
nature of the activities. The infrequent need for validity
exams and the limited need to prepare detailed Plans of
Operation suggests that the cost increases associated with the
proposed regulation are likely to be quite low, perhaps 5
percent, or less.'' (RFA, page 102).
It is unclear what the BLM means by ``an extensive or detailed Plan
of Operations'' because the data requirements for a Plan of Operations
are established in the 3809 regulations. Perhaps the reference to
``extensive or detailed'' pertains to the scope of the EA that is
required to evaluate and approve a Plan of Operations. In any event,
the RFA analysis completely misses the point. The increased costs, both
in time and money, are associated with the NEPA process and the
associated Federal consultation requirements (e.g., for cultural
resources, Native American issues, threatened and endangered species,
etc.)--not with preparation of the Plan of Operations. The RFA's
characterization of the increased exploration costs associated with the
proposed regulations is inaccurate and disingenuous at best.
The RFA Ignores Impacts to Nevada
Another significant flaw in the RFA analysis is its failure
to analyze impacts on a regional basis. The RFA evaluates
impacts nationwide rather than looking at specific geographic
regions that are likely to bear the brunt of the adverse
impacts associated with the proposed regulations. This allows
the impacts to be homogenized and smoothed out across the
country, thereby masking the significantly adverse consequences
that the proposed regulations will have on areas in which
exploration and mining are a major portion of a region's
economy. This is a significant shortcoming in the RFA in light
of the fact that the Draft EIS includes a number of statements
that disclose that Nevada will be more adversely affected by
the proposed regulations than other states. For example, in
discussing the decrease in the value of mine production from
public lands that would result due to the draft regulations
(the Proposed Action and Preferred Alternative--Alternative 3),
the Draft EIS states:
``Most states would see decreased levels of mining on public
lands, ranging from $55,000 in Oregon to $93 million in Nevada.
Nevada's share of the loss would be more than half of the loss
for the study area as a whole.'' (Draft EIS, page 214).
Substantial Revisions are Needed for the Economic Analysis and the
Draft EIS
The RFA analysis and the Draft EIS improperly characterize the
exploration component of the mining industry and fail to analyze and
disclose impacts to individuals and small businesses involved with
exploration. As the Research and Development (R&D) arm of the mining
industry, exploration is critically important to the long-term future
of mining in the U.S. A regulatory climate that restricts exploration
will ultimately cause a significant down-turn in future mining
activities. Thus, the adverse economic impacts associated with the
proposed alternative are substantially underestimated.
The RFA analysis and Draft EIS should be revised to correct
the significantly flawed analysis of the impact of the proposed
regulation on the exploration sector. The revised documents
should analyze the severe impacts that the proposed regulations
would have on individual geologists and consultants, and
disclose the long-term adverse effect that reduced exploration
would have on mining.
CONCLUSION
In our June 1997 letter to Mr. McNutt, the WMC expressed
concerns that the Secretary was using the 3809 rulemaking
process to advance a political agenda. We have ongoing concerns
that this is the case--especially in light of recent Department
actions such as the Solicitor's opinion regarding millsite and
lode claim ratio requirements. We believe the 3809 rulemaking
process should be an opportunity for collaboration and
constructive dialogue based on facts, science, and an honest
assessment of the level of environmental protection and
reclamation successes achieved under the status quo.
Political rhetoric will only detract from the outcome of
this process. The Secretary's ongoing politicization of mining
issues is unfortunate and inappropriate, and we hope in the
future the Secretary and others can put aside politics to
decide this important issue. One immediate action that the
Secretary should take to reduce the political invective would
be to extend the comment period on the Draft EIS until after
the Natural Research Council/National Academy of Sciences (NRC/
NAS) Committee on Hardrock Mining on Federal Lands has
completed their Congressionally mandated study. The Secretary's
current schedule ignores Congress' desire that the results of
the NRC/NAS study be incorporated into the final rule, and
wastes the $800,000 of taxpayers' money earmarked for the
study.
Due to the unreasonably rushed public comment period, the
WMC has not had sufficient time to complete our review of the
significant volume of materials furnished with this rulemaking.
Therefore, the absence of specific comments in this letter
should not be construed as agreement with any of the issues or
concepts presented in the Draft EIS, the Initial Regulatory
Flexibility Act, the proposed rule or any other BLM materials
associated with this rulemaking.
Sincerely,
Ann Carpenter
President
Barbara Sullivan
Secretary
Dominique Cone
Vice President
Debra Struhsacker
Author of Letter
Laurabelle Minser
Treasurer
Attachment: WMC June 18, 1997 letter to Mr. Paul McNutt, 3809
EIS Team Leader
Mr. Paul McNutt, 3809 EIS Team Leader
Bureau of Land Management, Nevada State Office
850 Harvard Way
Reno, NV 89502-2055
Dear Mr. McNutt:
INTRODUCTION
The Womens Mining Coalition (WMC) is a grassroots
organization of women involved with the hard rock mining
industry. Our membership is comprised of women working in many
facets of the mining industry including geology and
exploration, engineering, business and management, mining and
heavy equipment operation, equipment manufacturing, and sales
of goods and services to the mining industry. We have over 437
members located from coast to coast in 36 different states.
The WMC is keenly interested in the Department of Interior,
Bureau of Land Management's (BLM's) current efforts to revise
the 43 C.F.R. Subpart 3809 regulations (``the 3809
regulations'') because many of our members work at mines
located on BLM-administered lands, and a number of our members
work for companies that provide equipment, goods and services
to mines on BLM lands. Based on first-hand experience, many WMC
members can attest to the success which the 3809 regulations
have had in promoting environmentally responsible mining and
effective reclamation of mines on BLM-administered lands.
The WMC welcomes this opportunity to provide comments to
the BLM regarding the agency's proposal to revise the 3809
regulations. We are responding to the issues raised in the
March 1997 materials from the BLM's 3809 Task Force that
outline issues to be considered during the proposed scoping and
revision of the 3809 regulations, and to comments made by
Secretary Babbitt in his January 6, 1997 memorandum to the
Assistant Secretary, Land & Minerals and the Acting Director,
BLM.
In developing our comments, we have relied on our members'
experience in working on mining and mineral exploration
projects on BLM lands, and have given special consideration to
the following:
The strength, comprehensive nature, and proven track
record of the 3809 regulations;
The level of environmental protection and the
reclamation achieved under the current regulatory framework
applicable to mining, including the 3809 regulations;
The lack of any compelling justification or need
identified by the BLM that would warrant modification of the
3809 regulations;
The shortcomings of the BLM's scoping efforts and the
inappropriateness of the BLM's plans for concurrent development
of both the Draft Environmental Impact Statement (DEIS) and the
revised 3809 regulations;
The alternatives and issues we feel need to be
evaluated in the DEIS; and
Our concerns that the effort to revise the 3809
regulations not be misused as a political process.
COMMENTS ON THE ISSUES RAISED BY SECRETARY BABBITT AND THE 3809 TASK
FORCE SCOPING MATERIALS
Definition of Unnecessary or Undue Degradation
Many WMC members have direct experience in working under the 3809
regulations and implementing measures at the mine sites at which they
work to prevent unnecessary or undue degradation. It is our collective
experience that the unnecessary or undue degradation clause of the 3809
regulations has proven to be a comprehensive mechanism that effectively
mandates environmental protection. Given the level of environmental
protection required by this clause, the impressive track record of the
industry's compliance with this standard, and the numerous examples of
environmentally responsible mining and outstanding reclamation at mines
developed since 1981 under the jurisdiction of the 3809 regulations, we
find no justification whatsoever to modify the definition of
unnecessary and undue degradation.
Our members find that the unnecessary and undue degradation
definition specified in 43 C.F.R. Sec. 3809.0-5(k) requires stringent,
comprehensive, and appropriate levels of environmental protection for
the following reasons:
The definition states ``Failure to comply with
applicable environmental protection statutes and regulations
thereunder will constitute unnecessary or undue degradation.''
This requirement to comply with other state and Federal
environmental regulations is an effective built-in mechanism
for continually updating the 3809 regulations by incorporating
all other relevant environmental laws and regulations
simultaneously with their enactment.
The requirement to comply with ``applicable
environmental protection statutes and regulations''
automatically encompasses all environmental performance
standards, including technology-based standards from other
environmental and reclamation laws, as well as financial
assurance requirements mandated in state and Federal laws and
regulations.
The current definition appropriately implies a site-
specific environmental performance standard. Retention of this
site-specific concept is critically important to ensure that
environmental and reclamation measures employed at mines on
BLM-administered land are responsive to site environmental
conditions. The enormous diversity of climate, terrain,
geology, and the biologic and social environments at mines on
BLM-administered lands throughout the country demands a site-
specific performance standard that gives the BLM the necessary
regulatory flexibility and discretion to make custom-tailored
decisions appropriate for the site under consideration.
The current definition is a rigorous standard that
demands comprehensive environmental protection and reclamation
at mines on BLM-administered land. The BLM's ability to make
site-specific decisions about mines in no way lessens the
mining industry's burden of compliance compared to other
industries. Like all industries, the mining industry must
comply with all applicable state and Federal environmental
protection laws and regulations because all mines operate under
the umbrella of these provisions in addition to the 3809
regulations.
Secretary Babbitt's January 6, 1997 memorandum on the
3809 regulations advocates modifying the 3809 regulations to
include a new standard mandating the use of ``best available
technology and practices.'' Any modification of the 3809
regulations to include a best available technology and
practices standard would be inappropriate because it would not
improve environmental performance, add any extra measure of
environmental protection, or achieve better reclamation at
mines on BLM-administered land. To the contrary, the one-size-
fits all approach implicit in the best available technology
standard would result in inferior reclamation because there is
no best universal approach to reclamation. Superior reclamation
can only be achieved if the BLM and mine operators retain the
ability to custom-tailor reclamation measures to fit site-
specific environmental conditions. The wide range of
environmental conditions on BLM-administered lands throughout
the country demand the flexibility currently provided by the
unnecessary and undue degradation definition.
The 5-Acre Threshold for Notice Level Activities
The BLM must retain a process that allows for rapid review and
authorization of mineral exploration activities in order to remain in
compliance with the provisions of Sec. 2 of the Mining and Mineral
Policy Act of 1970, Sec. 102(a)(7),(8), and (12) of the Federal Land
Policy and Management Act of 1976 (FLPMA), and the 3809 regulations
that direct the Department of Interior to encourage the development of
Federal mineral resources and reclamation of disturbed lands. For
example, 43 U.S.C. Sec. 3809.0-1(a) states that one of the objectives
of the 3809 regulations is to:
``Provide for mineral entry, exploration, location, operations,
and purchase pursuant to the mining laws in a manner that will
not unduly hinder such activities but will assure that these
activities are conducted in a manner that will prevent
unnecessary and undue degradation and provide protection of
non-mineral resources of the Federal lands;''
Many WMC members are exploration geologists actively engaged in
mineral exploration efforts on BLM-administered land and thus have
direct and extensive experience working under the Notice of Intent
(NOI) 5-acre process. Based on this experience, we are unaware of
environmental problems associated with exploration activities performed
under NOIs.
The unnecessary and undue degradation performance standard
mandated in the 3809 regulations applies to mineral exploration
activities pursued under either an NOI or a Plan of Operations
(PLAN). Thus compliance with all applicable environmental laws
and regulations, and appropriate reclamation are requirements
for both NOI and PLAN sites. Those WMC members who are
exploration geologists, environmental coordinators, and
reclamation specialists have been personally responsible for
implementing reclamation measures and ensuring compliance with
the unnecessary and undue degradation performance standard at
numerous NOI sites throughout the country, and can attest to
the environmental protection measures, standard of care, and
reclamation efforts typically performed at NOI sites.
The BLM's scoping materials do not reveal any identified
problems with the 5-acre NOI threshold. Absent any clearly
stated problem with the 5-acre NOI threshold, and in light of
the stringent environmental protection and reclamation
requirements applicable to NOI sites, the WMC sees no
justification whatsoever for changing the 5-acre NOI process
for mineral exploration sites. Should the BLM have concerns
regarding the limited number of mining operations that may be
authorized under an NOI, the WMC recommends the BLM make
specific comments regarding any issues or concerns affecting
these operations, and confine the analysis of changes to the 5-
acre NOI process to these types of sites.
It is critically important that the BLM retain a process to
expedite the review and authorization of exploration-level
activities. Weather constraints at exploration sites in a
number of settings throughout the country severely limit the
practical exploration season. Moreover, a number of
stakeholders including but not limited to geologists,
consultants, drilling contractors, analytical laboratories, and
restaurant owners and motel/hotel operators in exploration
areas earn a significant portion of their livelihood during
this exploration season. Any changes to the review and
authorization process for small and initial (i.e., under 5
acres) exploration efforts that result in significant delays in
the approval process will adversely affect these stakeholders.
With this in mind, a thorough analysis of the socioeconomic
ramifications to these stakeholders of any proposed changes to
the NOI review process must be included in the DEIS prepared to
evaluate revisions to the 3809 regulations.
In evaluating any potential changes to the 5-acre NOI
threshold, the BLM must consider its newly established
(February, 1997) bonding requirements for NOI sites. It should
be noted that the WMC strongly supports reclamation and
appropriate financial assurance requirements at all mine and
mineral exploration sites, regardless of their size. However,
we strenuously object to the process--or in this case the lack
of process, used by the Secretary to promulgate these new
bonding requirements.
Time Frames for BLM Action on Plans of Operations
The WMC encourages the BLM to establish and comply with
mandatory time frames for reviewing and approving PLANS. The
mining industry is currently experiencing problematic delays in
the BLM's PLAN approval process. For the most part, the delays
are related to the time it takes the BLM to prepare an
Environmental Assessment (EA) or an Environmental Impact
Statement (EIS) as required by the National Environmental
Policy Act (NEPA). At least some delays appear to be due to
insufficient BLM staffing levels. Establishing clear regulatory
deadlines should help define BLM staffing requirements.
The DEIS should evaluate the potential for further delays
in the BLM's PLAN approval process if substantial changes are
made to the 3809 regulations. This evaluation should assess the
expanded BLM staffing levels that would be required to (1)
avoid additional delays, and (2) to decrease the time required
for BLM PLAN approval.
Coordination with the States
Coordination with state regulatory agencies is one of the
stated objectives of the 3809 regulations and directives in the
Secretary's January 6, 1997 memorandum. Specifically, 43 C.F.R.
Sec. 3809.0-1(c) states the following:
``Coordinate, to the greatest extent possible, with
appropriate state agencies, procedures for prevention of
unnecessary or undue degradation with respect to mineral
operations.''
To satisfy this objective, and to minimize duplication
among regulators as directed by the Secretary, the BLM must
continue to work closely with state agencies because all of the
western mining states have comprehensive environmental and
reclamation regulations applicable to hard rock mining.
The WMC strongly encourages the BLM to continue to
coordinate and cooperate with western state regulatory
agencies, many of whom have significant and valuable experience
in regulating the environmental aspects of hard rock mining.
Many WMC members, having worked in a number of western states,
have first-hand experience with the states' expertise and the
current level of coordination between the BLM and the states.
It is the WMC's opinion that the states and the BLM are working
well together and that the mining operations under this joint
state-Federal regulatory jurisdiction are complying with
applicable environmental requirements and implementing
successful reclamation measures. The WMC sees no reason to
change these cooperative efforts.
Performance Standards
Because the unnecessary and undue degradation standard in
the 3809 regulations mandates compliance with all applicable
state and Federal environmental laws and regulations, hard rock
mining operations on BLM land must already comply with a number
of environmental performance standards. Mining operations
developed under these regulations expend considerable resources
complying with these requirements. The 3809 regulations also
establish another performance standard--the mandate to
``Provide for reclamation of disturbed areas'' [see 43 C.F.R.
Sec. 3809.0-2(b)], but wisely and appropriately do not include
prescriptive, one-size-fits-all reclamation performance
standards.
Given the diversity of climate, terrain, geology, mineral
deposit types and mining methods regulated under the
jurisdiction of the 3809 regulations, uniform Federal
reclamation performance standards would be completely
inappropriate and would significantly diminish the quality of
reclamation currently being achieved at hard rock mines on BLM
lands. In 1979, the National Academy of Sciences performed an
independent review of the hard rock mining industry and
evaluated whether uniform, Federal environmental or reclamation
standards would be appropriate. This study, known as the COSMAR
Report, concluded that hard rock mining standards must be
tailored to site-specific conditions in order to be responsive
to the diversity of the environmental settings in which hard
rock mining occurs in the U.S.
COMMENTS ON THE SCOPE OF THE ENVIRONMENTAL IMPACT STATEMENT
DEVELOPED IN CONJUNCTION WITH THE REVISED 3809 REGULATIONS
Irregularities in the Public Scoping Process
In conjunction with revising the 3809 regulations, the BLM
will be developing a programmatic EIS to evaluate the impacts
associated with the proposed regulatory changes. The WMC feels
it is imperative for the BLM to conduct a comprehensive and
detailed analysis of the impacts of any proposed revision, and
consider stakeholder issues, concerns, and comments. With this
in mind, we support preparation of a programmatic EIS. However,
the WMC has significant concerns regarding the BLM's public
scoping efforts and plans for developing the EIS, and question
whether these efforts and plans satisfy the spirit and
obligations of NEPA.
A number of WMC members have considerable experience
working with the BLM during preparation of NEPA documents for
proposed mining projects on BLM land. This experience runs the
gamut from project proponent to third-party consultant selected
to prepare the NEPA document. The BLM's public scoping process
and plans for developing the programmatic EIS do not conform
with the public scoping process typically used by the BLM for
mining projects, and in our opinion, may not fully comply with
NEPA requirements for the following reasons:
The BLM Must State a Proposed Action Prior to Public
Scoping--The BLM's scoping documents do not include a
definitive and specific Proposed Action statement. The absence
of a specific Proposed Action statement makes it impossible for
the public to provide substantive comments regarding the BLM's
proposal. Thus, the scoping performed to date is generic in
nature and does not satisfy NEPA requirements to allow the
public to comment on the agency's proposal because none has
been set forth.
The BLM Must Develop a Statement of Purpose and Need--In addition
to lacking a Proposed Action, the BLM's scoping notice also does not
provide a statement of Purpose and Need. The absence of a statement of
Purpose and Need is another shortcoming with respect to NEPA and the
Council on Environmental Quality (CEQ) regulations for implementing
NEPA (40 C.F.R. Sec. 1502.13) which state that every EIS must ``briefly
specify the underlying purpose and need to which the agency is
responding in proposing the alternatives including the proposed
action.''
The BLM must justify their proposal to revise the 3809
regulations. To date, the BLM has offered no compelling reason
to change the regulations. In fact, the April 1992 BLM study of
the 3809 regulations showed no need for any changes to the
environmental or reclamation provisions of these regulations.
Thus it appears there are no tangible or substantive reasons to
modify the regulations. If the BLM is relying on any new
information which might justify changing the 3809 regulations,
this new information should be made available to the public.
The WMC questions the appropriateness of the BLM's
proposal to revise these long-standing regulations that have
been working well in light of the following: the large number
of environmentally responsible mines developed under the 3809
regulations, the industry's good track record in complying with
these regulations, the requirement at 43 C.F.R. Sec. 3809.0-
5(k) that mining operations comply with all applicable state
and Federal environmental and reclamation laws, and the
complete absence of any stated need to modify the 3809
regulations.
The BLM Should Provide Additional Scoping--To comply
with NEPA, the BLM should hold additional scoping sessions
following development of a draft proposal to revise the 3809
regulations to allow the public to comment on the specifics of
the proposed changes to the regulations. As stated above, the
scoping effort performed to date is generic in nature and
insufficient to allow public input on the proposed regulatory
changes.
The BLM Should Prepare the DEIS After Public Scoping
on the Draft Revisions to the 3809 Regulations
As stated in the March 12, 1997 memorandum from Sylvia Baca, Acting
BLM Director, to Bob Armstrong, Assistant Secretary, Lands and Minerals
Management, the BLM plans to develop the Draft EIS (DEIS) concurrently
with developing the proposed revisions to the 3809 regulations. The WMC
feels this is a completely inappropriate aberration of the NEPA
process. NEPA provides the public both a right and an orderly process
for commenting upon major Federal actions. The simultaneous preparation
of the DEIS and the revised regulations puts the cart before the horse,
denies the public the right to comment on a specific proposed action,
and is a significant departure from the typical public NEPA review
process.
The DEIS should evaluate the impacts of the proposed
revisions to the 3809 regulations and should consider and
respond to public issues, comments, and concerns about the
proposed revisions. Therefore, the DEIS should not be prepared
until after the public has had an opportunity to review and
comment upon the BLM's draft proposal for revising the 3809
regulations.
Alternatives and Issues to be Evaluated in the DEIS
The WMC supports preparation of a DEIS that comprehensively
evaluates the range of alternatives to revising the 3809
regulations, and thoroughly analyzes the impacts associated
with each alternative. With this in mind, we offer the
following comments and suggestions:
The DEIS Must Include a Detailed Discussion of the No Action
Alternative--The DEIS must include a substantive and thorough
analysis of the No Action Alternative to evaluate the level of
environmental and reclamation regulatory requirements that
would be applicable to future mining projects on BLM lands with
no changes to the 3809 regulations. The No Action Alternative
must consider existing state and Federal regulatory programs
and the BLM's existing authority and recent use of this
authority to modify the 3809 Regulations through policy
guidelines and rulemaking on selected topics (e.g., the
development of BLM policy guidance on acid rock drainage and
cyanide, and new occupancy and bonding rules).
The DEIS Must Analyze the Wide Range of Sites and
Mines Regulated Under the 3809 Program There is an enormous
diversity of climate, terrain, geology, mineral deposit types,
and mining methods represented by mine sites on BLM lands. Both
the Affected Environment and Environmental Consequences
chapters of the DEIS must give full and equal weight to the
many different types of environmental settings and mines, and
provide a separate analysis of the impacts that would occur at
these different settings and mines if the various alternatives
considered in the DEIS were implemented.
The DEIS Must Include a Detailed Analysis of State and
Other Federal Environmental Laws and Regulations Affecting
Mining--The Affected Environment chapter of the DEIS should
also include a detailed discussion of the many state
environmental and reclamation regulatory programs and Federal
laws and regulations affecting mining. The Environmental
Consequences chapter should assess how these programs would be
affected due to implementation of the DEIS alternatives. In
particular, this analysis should quantify impacts to state mine
land reclamation programs and Federal environmental regulatory
programs for which the states have primacy. Because many of
these state regulatory programs were developed after enactment
of FLPMA and development of the 3809 regulations, the DEIS
should acknowledge the evolution of these programs and the
coordination that has developed between the BLM and state mine
land reclamation and environmental regulatory agencies.
Based on information provided to date, the BLM has not identified
any gaps between the 3809 regulations and state mine land reclamation
and environmental programs. The DEIS should assess whether any such
gaps exist. If gaps are identified, proposed changes to the 3809
regulations should evaluate ways to fill the gaps. If this analysis
reveals no gaps between state programs and the 3809 regulations, few if
any revisions to the 3809 program are warranted--otherwise, the
Secretary's directive to minimize duplicative regulations will not be
satisfied.
The DEIS Must Include a Detailed Analysis of
Socioeconomic Impacts--Any changes to the 3809 regulations that
could result in significant delays in approving future mineral
exploration and mining PLANS could cause adverse economic and
social impacts to mining communities, state economies, and
other stakeholder groups including geologists, consultants,
drilling contractors, analytical laboratories, and restaurant
owners and motel/hotel operators in mining and exploration
areas who derive a substantial portion of their income working
for or providing goods and services to the hard rock mining
industry. The Affected Environment chapter of the DEIS must
acknowledge and quantify the positive social and economic
impacts associated with mining. The Environmental Consequences
chapter must disclose any positive or adverse social and
economic impacts that would result from implementation of the
DEIS alternatives. This analysis must be site specific; a
generic or national evaluation will not adequately assess the
impacts to local communities and regional economies.
Additionally, the DEIS must evaluate the economic impacts that
proposed changes in the 3809 regulations would have on mining equipment
manufacturers and companies that provide goods and services to the
mining industry. Many of these companies are located in parts of the
country not typically considered mining states such as Wisconsin (P & H
Mining Equipment and Nordberg), Illinois (Caterpillar), New Jersey and
Texas (Ingersoll Rand), etc. The continued existence of thousands of
jobs in these states relies on a strong mining industry in the western
U.S. The DEIS must thoroughly evaluate the economic consequences to
these workers and to their state economies caused by changes to the
3809 regulations.
The DEIS Must Consider Specific Impacts to Notice-
Level Qperators--The Secretary's directive to repeal, narrow,
or otherwise modify the 5 acre NOI process will have a direct
and focused impact upon individuals, small operators, and
companies who perform most of their mineral exploration and/or
mine development work under an NOI. The DEIS should include a
separate socioeconomic analysis of the impacts of the proposed
changes upon this groups of stakeholders. Because most mineral
discoveries start as NOI-level exploration projects, the DEIS
must also evaluate the impact that elimination of the NOI
process or delays in the NOI approval process would have on the
rate of discovery, and the impact to local, regional and
national economies as a result of diminished levels of
exploration, discovery, and mine development.
The DEIS Must Consider Cumulative Impacts--The DEIS
must evaluate the cumulative impacts of any proposed changes to
the 3809 regulations with respect to other connected actions
including but not limited to the EPA's proposed National Hard
Rock Mining Framework, the BLM's recent use and occupancy
regulations, the BLM's new bonding regulations, other EPA
initiatives such as the recent addition of the hard rock mining
sector to the Toxic Release Inventory (TRI) reporting
requirements and potential changes to the RCRA Bevill exclusion
for certain mining wastes, and changes to the Mining Law of
1872 being contemplated by Congress. This analysis should
evaluate the cumulative impacts of changes in the 3809
regulations in conjunction with potential changes in royalties,
fees, taxes, reporting requirements, and a plausible range of
future regulatory developments.
The DEIS Must Consider Impacts to Minerals
Availability--Changes to the 3809 regulations that result in
significant delays in the PLAN and NOI approval processes may
have an adverse impact on the supply of domestic hard rock
minerals. The DEIS should evaluate the impact that revisions to
the 3809 regulation would have upon minerals availability, and
the potential for increased reliance on foreign mineral
supplies. This analysis should consider the balance of foreign
trade payments as a result of decreases in domestic mineral
production. Similarly, the DEIS should consider how the 3809
regulations could be modified to encourage and facilitate
mining on BLM lands and the resulting positive economic effects
of increased mineral exports and decreased mineral imports.
The DEIS Must Consider Impacts to Existing
Operations--The DEIS must evaluate how existing operations
would be affected by proposed changes to the 3809 regulations.
The WMC encourages the BLM to develop a grandfathering
alternative applicable to all existing operations. In the
unfortunate event that the revised 3809 regulations mandate
prescriptive performance standards, some element of
grandfathering is necessary for both existing sites and sites
at which a PLAN modification is filed in the future because it
may be impossible or impractical to retrofit existing
operations to comply with new standards.
The DEIS Should Consider Alternatives to Facilitate
Mining and to Create Reclamation and Environmental Incentives--
Although the Secretary's January 6, 1997 memorandum does not
contemplate changes to the 3809 regulations to facilitate
mineral exploration and mine development or to create
incentives for reclamation and remediation of abandoned mines,
a number of beneficial social and economic impacts on the
local, regional, and nation levels could accrue from selected
changes. The WMC believes that regulatory changes to streamline
the review process and stimulate clean-up of abandoned mines
would significantly enhance mineral exploration levels without
compromising the high level of environmental protection and
reclamation success realized under the present regulatory
system. The WMC strongly urges the BLM to expand the scope of
the DEIS to evaluate revisions to the 3809 regulations to
encourage and facilitate environmentally responsible mining and
reclamation of abandoned mines.
CONCLUSION
The WMC appreciates this opportunity to provide comments to
the BLM, and we look forward to what we hope will be a
cooperative EIS process that includes additional opportunities
to comment on proposed changes to the 3809 regulations. We are
also hopeful that this process not become a political forum. We
believe this should be an opportunity for collaboration and
constructive dialogue based on facts, science, and an honest
assessment of the level of environmental protection and
reclamation successes achieved under the status quo. Political
rhetoric can only detract from the outcome of this process.
With this in mind, we are concerned that the Secretary's
statement in his January 6, 1997 memorandum regarding Congress'
failure to enact legislation reflects a political agenda. This
politicization is unfortunate and inappropriate, and we hope in
the future the Secretary and others can put aside politics to
decide this important issue.
Sincerely,
Ruth Carraher
President
Susie Patton
Treasurer
Teresa Conner
Secretary
Debra Struhsacker
Author of Letter