United States General Accounting Office Report to the Chairman, Subcommittee GAO on Mining and Natural Resources, Committee on Interior and Insular Affairs, House of Representatives December 1990 OREGON DUNES RECREATION AREA Patenting of Mining Claims Complies With Law GAO United States General Accounting Office Washington, D.C. 20548 Resources, Community, and Economic Development Division B-240377 December 26,199O The Honorable Nick J. Rahall, II Chairman, Subcommittee on Mining and Natural Resources Committee on Interior and Insular Affairs IIouse of Representatives Dear Mr. Chairman: This report responds to your request that WC determine whether the federal government and the holder of mining claims in the Oregon Dunes National Recreation Area followed the legal and administrative requirements for patenting claims filed under the Mining Law of 1872. The report also discusses inconsistencies between the mining law’s patent provision and more recent national natural resource policitts. As agreed, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of the letter. At that time, we will send copies to interested parties and make copies available to others on request. Please contact me at (202) 275-7756 if you or your staff have any questions about this report. Ma.jor contributors to the report art’ listed in appendix IV. Sincerely yours, James Duffus III Director, Natural Resources Management Issues Executive Summary The process to patent 780 acres of land in the Oregon Dunes National Recreation Area began in 1959 when two sets of claims were located along the Oregon coast-one called the Dreamer claims, on 3,160 acres, and a second called the Fox claims, on 1,480 acres. The claims contained sand high in silica content making it suitable for glass- making. In 1961, the Bureau of Land Management withdrew 18,000 acres on the Oregon Coast from mineral entry so that new mining claims could not be filed, and in 1972 the Congress passed the Oregon Dunes National Recreation Area Act, which set aside a 40.mile strip, including the land covered by t,he Dreamer and Fox claims, for recreation purposes. In 1968, the government invalidated the Dreamer claims, but in 1979 it ruled that the Fox claims were valid because the sand was uncommon and constituted a valuable mineral deposit before the lands were with- drawn. In 1982, the claim holder filed an application to patent the Fox claims, which were then within the recreation area. In July 1989, as the government was about to patent the claims, the state of Oregon requested that the government comply with a provision of the Coastal Zone Management Act that requires federal agencies, under certain cir- cumstances, to notify the states before undertaking activities that might affect the coastal area. On October 10, 1989, the government patented 780 of the 1,480 acres covered by the Fox claims. The remaining 700 acres were not patented because they were not on land open to patenting or they did not have sufficient mineral value to meet patenting requirements. The federal government acted properly when it concluded that the Results in Brief claims contained an uncommon variety of sand and, therefore, the claims were subject to the patent provision of the Mining Law of 1872. Also, the claim holder and the federal government complied with the legal and administrative requirements for patenting. The Fox claims were properly located, recorded, and maintained, and the patent appli- cation was properly filed. In addition, GAO believes the government’s position that it was not, required under the Coastal Zone Management Act to notify the state of the proposed patenting is legally supportable. Patenting these claims does raise questions about the consistency of the mining law’s patent provision with more recent national natural resource policies that call for the federal government to maintain owner- ship of public lands and obtain fair market value for public resources. Page 3 GAO/RCED91-8 Patenting of Oregon Dunes Mii Claims ExecutiveSummary mining law give claim holders the right to use the land for mining- related activities. From the perspective of resource management, because the land has been patented and transferred to private ownership, the federal govern- ment has lost control over its management. To maintain the control needed to manage the recreation area and conserve the scenic and other values that contribute to the public enjoyment, the Forest Service is attempting to reacquire the lands through a land exchange. From a fiscal perspective, the federal government received a patent fee of $1:950, or less than 1 percent of the $350,000 estimated value of the land. Moreover, if the sand-valued at millions of dollars-is extracted, the federal government will not receive financial compensation for the resources that it has given up. GAO makes no recommendations in this report. Recommendations The Department of Agriculture’s Forest Service and the Department of Agency Comments the Interior provided written comments on a draft of this report. Both agreed with the facts in the report and GAO'S conclusions that the legal and administrative requirements for patenting were followed. Interior, however, said that GAO implied there are conflicts and inconsistencies between the Mining Law of 1872 and the Federal Land Policy and Man- agement Act. Interior pointed out that the Federal Land Policy and Man- agement Act sets a policy of federal ownership of public lands and obtaining fair market value for its resources, but in doing so excludes the Mining Law of 1872 and specifically the patent provision. GAO recog- nizes that the mining law is exempt from the Federal Land Policy and Management Act and has inserted language in this report to emphasize this point. However. GAO notes that patenting is not essential for min- erals exploration and development because other provisions of the mining law give claim holders the right to use the land for mining- related activities. Interior’s and Forest Service’s comments and GAO'S evaluation are presented in appendixes II and III. page5 GAO/RCEDSl-EPatentingofOreSonDunesMiningClaims Page 7 GAO/lUXD91.8 Patenthg of Oregon Dunes Mining Claims Chapter 1 Introduction 1955, ch. 375 (30 USC. 601, Sll), commonly called the Multiple Use Mining Act of 1955, removed common varieties of sand, stone, gravel, pumice, pumicite, clay, and cinders from the mining law’s coverage, so that the land containing such materials could not pass to private owner- ship. The act also authorized federal agencies to sell the mineral mater- ials on these lands. However, the 1955 act allows mineral deposits having unique properties that give them special and distinct value to remain under the mining law, thereby giving claim holders all associated rights under that law, including the right to seek a patent. A number of other pieces of land-use legislation, including the Federal Land Policy and Management Act of 1976 (FLPMA) (43 lJ.S.C. 1701, et seq.) and the Coastal Zone Management Act. (CZMA) (16 U.S.C. 1451 z seq.) can be relevant to mining. FLPMA establishes policies that call for the federal government to maintain ownership of federal lands and obtain fair market value for its resources. IIowcver, FWMA also pre- serves claim holders’ rights under the Mining Law of 1872, including the right to patent public lands. Among CZMA’S intended purposes is that of fostering consistency between federal and state agencies regarding activities along the coast. The act requires that federal agencies, to the maximum extent practi- cable, conduct in a manner that is consistent with approved state man- agement programs, those activities that are covered by the law and that directly affect the coastal zone. When agencies determine that a pro- posed activity is covered by the act and will directly affect the coastal zone, they are required to provide the affected state with a “consistency determination” at least 90 days before they grant final approval for such an activity. If a federal agency proposes an activity covered by the law and decides that it does not directly affect the state’s coastal zone, it is still required to notify the state’s coastal zone management agency of its decision at least 90 days prior to the proposed action. Sand dunes line the Pacific Ocean beaches along the middle of Oregon’s History of the Oregon coast. In 1959 Mr. Maurice DuvaP located two sets of claims in the Dunes National Siuslaw National Forest along the Oregon Coast-one called the Recreation Area Dreamer claims on 3,160 acres and a second called the Fox claims, on 1,480 acres. Because thr sand in both sets of claims is very high in silica “Several other people, mostly I)wal family members. were associated with the &mu through part- nerships known as grub-stake- umtracts. WC will rcfrr tr, thex- claim holders collectively as the DUL als Page 9 GAO/RCED-91-8 Patenting of Oregon Dunes Mining Claims Chapter 1 Introduction Figure 1.1: Duval Claims in the Oregon Dunes National Recreation Area Siuslaw River \ ’ \ \ \ \ \ ‘\ \ \ \ \ Oregon \ I : !!I i : : -: Umpqua River q.:::>:::::::: .../...i ... i.....:...:.: Oregon Dunes National Recreation Area Claims for which patents Ia were approved (Fox claims) Claims filed but not approve El for patenting (Dreamer claim! +----- Existing operations I ! Coos Bay Page 11 GAO/RCED-91-g Patenting of Oregon Dunes Mining Claims Chapter 1 Introduction office to verify that the notices had been filed in a timely manner both with the county recorder’s office and, subsequent to FLPMA, with BLM.” 2) To determine whether the claims had been maintained, we reviewed the affidavits filed with IHM certifying that the annual work require- ment had been met. 3) To determine whether the patent application had been properly filed, we reviewed the patent application documents that had been filed with IKM to ensure that the information supplied met the requirements of the federal regulations. To determine whether proof of a valuable mineral deposit had been established at the critical dates during the process, we reviewed the information included in the transcripts of the Fox claims hearings in 1978 and the testimony of the witnesses for the claim holder. We also reviewed the information filed with the patent application, including affidavits from intercj>tcd buyers and financial statements from the claim holder’s existing mining operation, as well as projected financial statements from the, proposed mining operation. To determine whetlLcr i%M was required to comply with the notification provisions of the ~n1.4. we reviewed the correspondence between BLM and the State of Orrlgon’s Department of Land Conservation and Devel- opment and spoke to officials of both agencies. We also reviewed the CZMA, the Interior Solicitor’s opinion on the applicability of the act, and the court case upon which it was based. To develop the chronological case study, we reviewed all relevant files available at BLM’S Oregon State Office and the Forest Service’s Region 6 Office, which provided an extensive history of the 30-year process. We also spoke to BLM and Forest Service officials who had been involved in the processing of the c,laims and the patent application. Our work was conducted between October 1989 and March 1990 in accordance with gcncrally accepted government auditing standards. ‘Before implementation of FLPMA. tNc fding requirements for notices of location and annual assess- ment work performed wew iontrolled by state laws. There was no requirement before 1976 to file documentation on most mming &imh with RLM unless the claim holder was applying for patent. FLPMA required holders of &urns located before October 21. 1976-the date of FLPMA’s enact- ment-to record their clamx bcforv October 22, 1979, or else they would be considered abandoned and void. Page 13 GAO/RCED-91-8 Patenting of Oregon Dunes Mining Claims Patenting ProcessMeets Legal and Administrative Requirements To patent claims for sand, claim holders must first prove that the sand is an uncommon variety. This entails establishing that the sand in ques- tion has unique qualities that give it distinct and special value. Once over that hurdle, claim holders then must meet the mining law’s various requirements, including establishing that they have (1) discovered a val- uable mineral deposit, (2) met the annual work requirement, and (3) met the patenting requirements. In addition, the State of Oregon asserted that, before issuing the patent, BLM had to meet the notification require- ments of the Coastal Zone Management Act (CZMA). We believe the Duvals, BLM, and the Forest Service met the relevant requirements. However, we also believe that patenting these claims, which in the absence of state and local zoning requirements would allow mining in a national recreation area, illustrates the inconsistencies between the patenting provision of the mining law and federal steward- ship requirements in more recent national natural resource policies. After BLM withdrew the Oregon Dunes National Recreation Area from Sand in the Patented mineral entry in 1961, the federal government challenged the validity of Mining Claims Was the Dreamer and Fox claims in an effort to invalidate them. The federal Determined to Be an government contended that the Dreamer claims contained common variety sand and that, for both the Dreamer and Fox claims, discovery Uncommon Variety of a valuable mineral deposit had not been made before the lands were withdrawn. After several appeals were exhausted, the Dreamer claims were declared null and void on the basis that a valuable mineral deposit had not been discovered. The government ruled that a valuable mineral deposit had been discovered on the Fox claims and, except for certain lands that were not subject to claim or did not contain enough valuable minerals, they were eventually patented. Dreamer Claims Were When BLM closed part of the dunes to further exploration for minerals, Challenged and Declared the boundary enclosed the Fox and the Dreamer claims. However, the Duvals maintained rights under the mining law to develop these claims. Null and Void The Forest Service began its efforts to invalidate the two sets of mining claims by challenging the Dreamer claims in 1966. The mineral report prepared by a Forest Service minerals examiner concluded that the sand on the claims was so widespread that it was a common variety and therefore not covered by the mining law. The report also concluded that even if the claims had been covered by the mining law, they would be invalid because the claim holders had not proven that a market existed Page 15 GAO/RCED-91.8 Patenting of Oregon Dunes Mining Claims Chapter 2 Patenting Process Meets Legal and Administrative Requirements glass-making, a use which commanded a higher price than common sand, the Forest Service agreed with the claim holders that the sand was uncommon and therefore that the land was subject to claim under the mining law. The minerals examiner also concluded, however, that the claim holder had not proven the existence of a market for the sand before the lands were withdrawn and therefore had not proven dis- covery of a valuable mineral deposit. In response to this conclusion, BLM challenged the validity of the claims. However, Interior’s Office of Hear- ings and Appeals ruled in 1979 that the claims were valid, in part, because additional information provided by the Duvals established that in 1961, when the lands were withdrawn from mineral entry, there had been a potential market for the sand. A government appeal to Interior’s Board of Land Appeals was decided for the Duvals in 1981, and the Fox claims were upheld as valid. In 1982, the Duvals filed an application to patent the Fox claims. During the patent application process, BLM disapproved patenting 480 acres of the claims because they were filed on lands that had never been open to exploration for minerals and an additional 220 acres because they did not contain sufficient minerals to be considered a valuable mineral deposit. The remaining 780 acres were recommended for patenting in 1987, and the patent was issued on October 10,1989. The government received $1,960, based on a patent fee of $2.50 an acre, for this land. The Duvals, BLM, and the Forest Service complied with the legal and The Legal and administrative requirements of the Mining Law of 1872 for filing, main- Administrative taining, and patenting the Fox claims. Implementing regulations require Requirements of the a claim holder to satisfy the following legal and administrative require- ments during the mining claim and patent application process: M ining Law of 1872 Were Met . Locating. To locate a mining claim, the claimant must (1) stake the claim (except for certain placer claims-claims for minerals found in masses of sand or similar material), (2) post a notice of location on the claim, and (3) comply with state laws, including filing a notice of location with the county recorder’s office. . Recording. To record a mining claim, the claimant must file a copy of the official notice of location at the appropriate BLM office within 90 days after the date of location of the claim, or by October 22, 1979, for claims that were located before October 21, 1976. . Maintaining. To maintain a mining claim, each year the claim holder must file an affidavit attesting that at least $100 worth of development- related work has been carried out for each claim. The claim holder must Page 17 GAO/RCED91-8 Patenting of Oregon Lhmes Mining Claims Chapter 2 Patenting Process Meets Legal and Administrative Requirements BLM maintained that issuing a patent does not constitute a federal activity as envisioned under the law and therefore declined to issue a consistency determination or to give the state a go-day notice. In taking this position, BLM determined that the act’s provisions did not apply to patenting because issuance is not discretionary on BLM'S part and because the mere transfer of a title does not constitute a federal activity. As precedent for its actions, BLM cited a court decision (Ono v. Harper, 592 F. Supp 698, 1983) in which the US. District Court for Hawaii found that a sale of federal land by the General Services Admin- istration to a private individual did not constitute a federal activity that directly affected the coastal zone. We believe BLM'S position is legally supportable. In this instance, although the act requires all federal activities that directly affect the coastal zone to be coordinated with a state’s coastal management agency, like the Ono case, transfer of title alone does not directly affect the coastal zone since, of itself, it does not change the way the land is being used. The Forest Service’s policy in managing the recreation area is to acquire, Forest Service Seeks to through purchase or land exchange, all private lands in the “dunes Restore Patented sector,” which includes the area where the patented claims are located. Lands to Federal The purpose of these acquisitions is to give the Forest Service the con- trol needed to manage recreation and conserve the scenic and other Ownership values that c0ntribut.r to the public’s enjoyment. To this end, it has acquired 1,200 acres since the recreation area was established and, until the Fox claims were patented, no private land remained in the dunes sector. In an attempt to restore the 780 acres of patented lands to federal own- ership, the Forest Service, ELM, and the Duvals agreed to explore exchanging the patented land for land outside the recreation area. Accordingly, the Duvals agreed not to exercise their ownership rights until March 1991 to allow the Forest Service time to evaluate suitable options for an exchange. Establishing the value of land to be exchanged is difficult. In the case of the Fox patent, when t,he land covered by the claims passed from public to private ownership, it became subject to state and county restrictions that limit its use and value. For example, the state’s legally binding land- use plan prohibits mining in significant shoreland areas and residential development on beaches and active foredunes-grassy sand hills rising Page 19 GAO/RCEDBl-S Patenting of Oregon Dunes Mining Claims Chapter 2 Patenting Process Meets Legal and Administrative Requirements From the perspective of resource management, because the land is pat- ented, the Forest Service has lost control over its management. If an exchange cannot be made by March 1991, the Duvals are free to use the 780 acres in any way they choose within state and county restrictions. Forest Service officials believe that mining is unlikely because of the county’s strict zoning. However, they believe that the presence of pri- vate land within the recreation area will limit the agency’s ability to effectively manage adjoining public land. For example, they believe it would be more difficult to implement planned programs to enhance wet- lands. They also anticipate that activities such as the use of off-road vehicles-which they consider inconsistent with the area’s use as a roadless, isolated area noted for its quiet and scenic beauty-will increase with or without the Duvals’ approval, and/or that a waterfowl hunting club could be established. From a fiscal perspective, the federal government received $1,950, or less than 1 percent of the $350,000 estimated value of the land with constrained options for development. Moreover, if the sand-valued at millions of dollars-wcrt: to be extracted, the federal government would not receive any monetary compensation. The responsible federal agencies and the claim holder met the legal and Conclusions administrative requirements for patenting mining claims within the Oregon Dunes National Recreation Area. We believe, however, that the patenting of mining claims within this scenic public recreation area for a fraction of the lands’ estimated value, coupled with the accompanying management problems that it creates, illustrates the inconsistencies between the mining lavv’s patent provision and more recent national nat- ural resource politics. The Department of Agriculture’s Forest Service and Interior provided Agency Comments and written comments on a draft of this report. Both agreed with the facts in Our Evaluation the report and GAO'S conclusions that the legal and administrative requirements for patenting were followed. Interior, however, said that GAO implied that thcrc are conflicts and inconsistencies between the Mining Law of 1872 and FLPMA. Interior pointed out that FLPMA sets a policy of federal ownership of public lands and obtaining fair market value for its resources. but in doing so excludes the Mining Law of 1872 and specifically the patent provision. Interior also commented that GAO had not recognized other national policies that call for managing public Page 21 GAO/RCED-91-8 Patenting of Oregon Dunes Mining Claims Page 23 GAO/RCED91-3 Patenting of Ore&m Dunes Mh@ Chha Appmiix I Time Line of Key Events in the Oregon Dunes Mining Claims and Patent Application Process Date Action the deposits were held to be a common vatlety and not subject to locatlon In addltlon, because no market for the sand had been establlshed, the claim holders had falled to meet the test of dlscovery Dreamer claims Nos. l-14 and 16-25 were declared null and void. The Duvals subsequently appealed this declslon. November 5 BLM’s Office of Appeals and Hearings afflrmed the hearing examiner’s March 15 declslon This declslon stressed the widespread occurrence of the sand but did not specIfIcally affirm that the sand was a common variety The Duvals appealed this declslon 1970 November 23 The lnterlor Board of Land Appeals (IBLA) Issued a declslon (1 IBLA 103, 1970) that upheld the lower rulmgs that the Dreamer claims were null and vo10 IBLA decided the Issue on the basis of the fact that a valuable mlneral deposit had not been dlscovered and did not address the common variety questlon 1971 July 2 The Duvals flied a petItIon for reconslderatlon of IBLA’s decision stating that the record did not support the conclusions reached by IBLA As an alternatlve to reversing IBLA’s decision, the Duvals requested a further heanng to present addItIonal evidence to establish proof that a valuable mlneral deposit had been discovered prior to the date of wlthdrawal August 24 Denying the petihon for reconslderatlon, IBLA stated that the preponderance of the evidence, lncludlng new evidence in the petItIon, continued to support the conclusion that there was no valid dlscovery pnor to July 16. 1961, the date of withdrawal At this point the Duvals had exhausted the possible remedies wIthIn Interior’s admlnlstratlve law process September 29 The Duvals flied a CIW complalnt in the U S. Dlstnct Court for Oregon against the Secretary of the lnterlor (Duval v Morton, Civil No. 71-664) stating that IBLA had erred, was arbitrary and capncious, had not supported Its declslons, and had abused Its dlscretlon when it denied the Duval’s petItIon 1972 March 23 Public Law 92~260 establtshed the Oregon Dunes National Recreation Area August 23 U S. Dlstrlct Court Issued a judgment III Duval v Morton dlsmisslng the CIVII cornplaInt and flndlna that IBLA had consldered all the evtdence and correctly concluded That there had not been a valid dlscovery The District Court’s declslon also stated that there had been no abuse by IBLA In denying the request for reconstderatlon of the further hearing The Duvals appealed this declslon to the U.S Court of Appeals for the 9th Clrculi 1973 August The Duvals began mlnlng sand near Coos Bay on pnvate land and selling sand for use In glass manufactunng and In other Industries. December 19 The U S Court of Appeals for the 9th Circuit afflrmed the District Court declslon 1974 IBLA Issued a declslon In another case-McClarty v Secretary of the Interior regarding whether a mlneral deposit was common or uncommon Inreaching Its declslon, IBLA used the guidance that the U S Court of Appeals for the 9th Clrcult established in 1969 when It remanded the case 10 W A for reconslderatlon of whether the mineral on which the (continued) Page 26 GAO/RCEDI)l-8 Patenting of Oregon Lhmes Mining Claims Appendix I Time Line of Key Events in the Oregon Dunes Mining Claims and Patent Application Process Date Action September 29 Interror’s Regronal Solrcrtor Issued a favor? able oprnron statina that the trtle evrdence and accompanvrnq data disclosed that the applrcants had valid trtle to the clarms - February 17 BLM requested addrtronal informatron from the applrcants to venfy that at least $500 of development work had been done for the benefit of each clarm The Duvals furnished the necessary documentatron attesting to the development work performed June 22 BLM Issued the Mrneral Entry Final Certlfrcate certrfying that the Duvals’ patent applrcatlon for the Fox clarms (1,000 acres) met all requrrements. After thus document was issued, the claim holder no longer had to comply wrth the annual work requirement August 4 A Forest Servtce consultant submitted hrs mrneral examrnation. whrch recommended that 220 acres of the Fox clarms should not be patented because they did not contarn sufficrent valuable minerals to be economrcally mrned and that the remanning 780 acres should proceed to patent The consultant also stated that on the basrs of rnformatron suppked by the applrcant, he belreved that the $500 expendrture requrrement had been satisfied. 1999 May 26 The Forest Servrce notrfred BLM that It had no obfection to patenhng 780 acres of the Fox clatms as recommended bv the mrnerals exammatron report. July 28 The U S House of Representative’s Commrttee on Intenor and Insular Affairs. Subcommrttee on Minrna and Natural Resources, reauested the Secretary of the Interior to delay patentrng the Fox claims pendrng a thorough Investigation by the Intenor Department and the General Accountrng Offrce July 28 The Charrman. Subcommrttee on Minrng and Natural Resources, House Commrttee on Interror and Insular Affarrs, requested the General Accounting Offrce to Investigate the Fox mrnrng claims. July 28 The State of Oregon’s Department of Land Conservation and Development requested that BLM submit a consistency determrnatron on the rssuance of the mrnrng patent under the provrsions of the Coastal Zone Management Act September 26 The Duvals, BLM, and the Forest Servtce srgned a letter of Intent for a land exchanae and the Duvals aareed to take no achon on the clafms for 17 months w?lile the parhes attempted to complete the exchange October 7 The Subcommrttee on Mining and Natural Resources held a heanng rn Eugene, Oregon, on the proposed patent of mrnrng clarms wrthrn the Oregon Dunes National Recreatron Area October 10 BLM Issued Patent 36~90-0002 to 780 acres Page 27 GAO/RCED-9148 Patenting of Oregon Dunes Mining Claims Appendix II Comments From the Department of the Interior r Response to Draft Report by the General Accounting Office FEDERAL LAND MANAGEMENT: "Oregon Dunes National Recreation Area: Patenting of Mining Claims Complies with Law" See comment 1 (GAO/RCED-90-216) GENERAL C O M M E N T S The principal findings of the report are: 1. Sand on the Fox mining claims is subject to the Mining Law of 1872. 2. The legal and administrative requirements for determination of validity of an "uncommon variety" and application for mineral patent were met. 3. Patenting of mining claims is inconsistent with national natural rescJurce policies. Items one and two, above, vindicate BLM's handling of the Oregon Dunes case during the last 30 years. The finding in item three is incorrect. The GAO report quotes the Federal Land Policy and Management Act of 1976 (FLPMA) as setting the policy of Federal ownership of public lands and obtaining fair market value for its See comment 2 reaotlrces. This Is generally correct, however, FLPMA excludes the patenting provisions under the Mining Law of 1872 from this policy (43 U.S.C. 1701, Sec. 302(b)). As expanded below, the GAO stresses the inconsistencies between FLPMA policy and the 1872 Mining Law. However, FLPMA states that: "Except as provided in section 314, section 603, and subsection (f) of section 601 of this Act and in the last sentence of this paragraph [section 302(b)], no provision of thfs section or sny other section of this Act shall in any way amend the Mining Law of 1872, or impair the rights of any locators or claims under that Act, including, but not limited to, rights of ingress and egress." 43 U.S.C. Sec. 1732(b). Page 29 GAO/RCEB91-9 Patenting of Oregon Dunes Mining Claims Appendix II Comments From the Department of the Interior - 3 minerals reclamation industries, [and] (2) the orderly and economic development of domestic mineral resources, reserves, and reclamation of metals and minerals to help assure satisfaction of industrial, security, and environmental needs.... " 30 U.S.C. Sec.2la. And further in the Act, "It shall be the responsibility of the Secretary of the Interior to carry out this policy when exercising his authority under such programs as may be authorized by law other than this section." 30 U.S.C. Sec.21.9. Mining, claim-staking, and patenting are legitimate uses of the public lands, and as such, are the means by which private enterprise is encouraged to develop sn economically sound and stable domestic mining industry, as mandated by the Mining and Mineral Policy Act of 1970. The BLM has managed mining use6, along with range, recreation, wildlife, lands, and other uses through its planning and environmental processes to try to meet the needs of the public in an equitable and environmentally sound manner. Again on page 26, GAO fails to mention that the same act (FLPMA) calling for "maintain[ingl ownership of public lands and . . . obtain[ingl fair market value ," also calls for "the public lands [to] be managed in a manner which recognizes the Nation's need for domestic sources of minerals...." 43 U.S.C. Sec. 1701(a)(12). See comment 6 2. On page 9, paragraph 1 under "Background", states "First, neither prior notification to the government nor a permit is required when prospecting for minerals covered by the act." This statement is misleading. The Mining Law of 1872 requires $100 of annual labor, and 43 CFR 3833.2-4 requires that a mining claimant file annually an affidavit of assessment work, or a notice of intent to hold the claim--43 CFR 3822.2-S. Assuming that a mining claimant is being diligent, and complying with the intent of the mining laws and regulations, the mining claimant is giving "notification" to the Federal Government, as well as the State and counties, by filing this affidavit that he is actively prospecting his mining Claim. In addition, under 43 CFR 3809.1-3, a notice must be filed by the mining claimant with the authorized officer for operations, including prospecting, that will disturb 5 acres or less of surface. Approval for notice-level activity is not required, but reclamation of the site, is required. For surface disturbances over 5 acres, an approved plan of operations and an environmental review, including reclamation plans, are required prior to commencement of mining activities, The standard for all activities by mining claimants/mine operators, regardless of acreage disturbed, is that they not create undue or ""necessary degradation of the land as per FLPMA at Sec. 302(b). On page 22, it is pointed out under "Maintaining" that an annual filing is required by BLM and the counties. See comment 7 3. 0" page 10, regarding the reference to "the COMMONVARIETIES ACT OF 1955." This is s the title this Act is known by, and only a portion of this Act deals with common varieties. Page 31 GAO/RCED91-9 Patenting of Oregon Dunes Minhg Claims Appendix U Comments From the Department of the Interior 5 See comment 8 7. On page 16, again, the GAO stresses the problems with the incongruity between mining and recreation. However, once again, the mining ‘activity in this area pre-dated the establishment of the recreation area. The recreation area was crested to prohibit any further mining of the area. On page 24, the GAO states that the Forest Service wants to prevent mining in the recreation area by acquiring the patented land through an exchange. See comment 7 0. Page 20, paragraph 1, again refers to “the Common Varieties Act.” RECOMMENDATIONS We feel that the discussions involving alleged inconsistencies end conflicts between the 1872 Mining Law and FLPMA are incorrect and should be revised. If these discusslons are retained, we feel that our comments regarding these See comment 2 inconsistencies be included in the report. Page 33 GAO/I(CEDSl-(I Patenting of Oregon Dunes Mining Claims Appendix ff Comments From the Department of the Interior 4. Interior commented that the diligence requirement should be referred to as the “annual labor” requirement rather than the “annual work” requirement. The Mining Law of 1872 provides that the annual amount of work necessary to hold a mining claim would be “not less than one hundred dollars’ worth of labor.” However, the range of activities that currently satisfy the annual diligence requirement, such as geological, geochemical, and geophysical surveys, go far beyond a miner’s labor. Accordingly, we believe that the phrase “annual work requirement,” which appears to be virtually interchangeable with “annual labor requirement,” is more descriptive, and thus we use it consistently throughout our reports. 5. Clarifications have been made to the text of this report 6. The text has been clarified to better describe the mining law’s right of self-initiation that allows citizens, either corporate or individual, with no governmental permission, to locate mining claims or to conduct neces- sary activities that do not disturb the surface on lands open to mining. 7. We have replaced the “Common Varieties Act of 1955” with the “Mul- tiple Use Mining Act of 1955.” 8. Interior commented that the Fox claims in the Oregon Dunes do not illustrate an inconsistency between mining and recreation because the mining activity (staking the claims) occurred before the recreation area was established. Our report clearly acknowledges the existing rights of the claim holders, including the right to patent the lands. However, we believe that the patenting of mining claims within a national recreation area for a fraction of the land’s estimated value, coupled with the accompanying management problems that it creates, is another example of the mining law’s inconsistency with more recent national natural resource policies. Page 36 GAO/ECED-91-8 Patenting of Oregon Dunes Mining Claims Appendix III Cnmments From the Forest Swvicr Hr. John W. Harma" 2 See comment 2 (7) The correct spelling is Hcclarty, not ncc1arity (page 20). (13) On page 23, the first paragraph indicates that the validity of the claims was challenged by the Forest Service. In the context used, this general statement needs clarification. The Forest Service challenged the validity of the claims in a" administrative hearing (contest) and also challenged the information submitted by the claim holders indicating $500 See comment 2 of expenditures per claim. The paragraph is referring to the latter challenge. These are OUT points of concern. Thank you for the opportunity to cmmnent on the draft report. If you have any questions o" our comments, please contact Sam Hotchkiss at 453-8235 CC: OIG (J. Hill) N&CM Lands F-SF’S Page 37 GAO/RCED-91-8 Patenting of Oregon Dunes Mining Claims Appendix IV -___ Major Contributors to This Report Robert W. Wilson, Ass&ant Director Resources, Robert E. Cronin, Assignment Manager Community, and Economic Development Division, Washington, D.C. D. Lamar White, Evalual.or-in-Charge Seattle Regional Office -- Carole J. Moore. Staff Evaluator Stanley G. Feinstein, Senior Attorney Office of the General Counsel, Washington, D.C. (140257) Page 39 GAO/RCED-91-8 Patenting of Oregon Dunes Mining Claims Appendix IlI Comments From the Forest Servicr The following are GAO’S comments on the Forest Service’s letter dated September 13, 1990. 1. The identification number for this report has been changed to GAO’s Comments (GAOIKCED-91.8) to reflect the fiscal year in which it was issued. 2. Clarifications have been made to the text of this report, 3. The Forest Service commented that the report’s statement concerning claim holders’ rights to sell extracted materials without monetary com- pcnsation to the government is not germane to the scope of the report. The report describes the mining law’s provisions governing the sale of minerals because it is an integral part of the mining law and because it makes clear one of the important benefits derived from having the sand in the Oregon Dunes claims determined to be uncommon rather than common and therefort) subject to the Multiple IJse Mining Act of 1955. Page 38 GAO/RCEB9lB Patenting of Oregon Dunes Mining Claims Appendix III Comments From the Forest Service Note GAO comments supplementing those I” the report text appear at the Forest Washington 14th 6 Independence SW end of this appendix service Office P.O. Box 96090 Washington. DC 20090-6090 Reply To: 1420 D*=*: SEP I3 1890 Hr. John W. Harman. Director Lend and Agriculture Issues Resources, Community. and Economic Development Division General Accounting Office Washington, D.C. 20548 Dear Mr. Harman: We have reviewed the draft report entitled Federal Land Hanagement: Oregon See comment 1 Dunes National Recreation Area Patenting of Hining Claims Complies With Law, GAO/RCED-90-216. We believe the report accurately describes the events that took place, the actions by the Government, and addresses the issues and specific questions (pages 15 and 16) by Chairman Nick Rahall of the House Subcommittee on "ining end Natural Resources. Tbe fallowing technical aspects need to be addressed: See comment 2 (1) Tbe statement on page 2. paragraph 3, implies the Forest Service is required to sell mineral materials. The disposal of mineral materiels is a discretionary action, and frequently done without user fees. See comment 2 (2) The references that the Forest Service withdrew lands from mineral entry are not correct. The Government does this through the Bureau of Land Management. See comment 3. (3) Most of the first line on page 2 is not germane to the scope of the ?Xp.Jrt. We recommend it reed "for mining activities and extract the minerals." See comment 2 (4) The second sentence of paragraph 2, page 2, is not technically correct. The test for discovery only requires a reasonable prospect of success. See comment 2 (5) There is not e specific name far the Act of July 23, 1955, but the popular name most frequently used is the Multiple Use Mining Act of 1955. (6) Paragraph 2, on page 9 is misleading in implying that e mining claim holder can prospect an National Forest System lend without notifying the See comment 2 Forest Service. Tbe text should reflect the language of the Federal regulations for locatable minerals (36 CF'R 228.4) which requires the filing of a Notice of Intent with the Forest Service, end a Plan of Operations when surface disturbance will be significant. Page36 GAO/RCEDSl-SPatentingofOregonDunesMiningClaims AppendixIl CbmmentsFromtheDepartmentof the Interior - The following are GAO'S comments on the Department of the Interior’s letter dated October 12, 1990. 1. The identification number for this report has been changed to GAO’s Comments (GAO/RCED-91-8) to reflect the fiscal year in which it was issued. 2. Interior commented that GAO implied that there are conflicts and inconsistencies between the Mining Law of 1872 and the Federal Land Policy and Management Act of 1976 (FLPMA). Interior pointed out that FLPMA sets a policy of federal ownership of public lands and obtaining fair market value for its resources, but in doing so excludes the Mining Law of 1872 and specifically the patent provision. Interior also com- mented that GAO had not recognized other national policies that call for managing public lands to meet the demands for domestic sources of min- erals and fostering and encouraging private enterprise to develop these resources. We are sensitive to the need to manage public lands to meet demand for domestic sources of minerals and to foster and encourage private enter- prise to develop these sources and recognize that FLPMA exempts the Mining Law of 1872 and its patent provision from current national nat- ural resource policies relating to federal stewardship of public lands. To clarify this, we have made changes to the report text. However, pat- enting is not essential for mineral exploration and development because other provisions of the mining law give claim holders the right to use the land for mining-related activities. In addition, our 1989 report also iden- tified (1) a number of laws enacted subsequent to FLPMA that accommo- date mining while requiring that the federal government retain title to the land, subject to valid existing rights and (2) other legislation that has left hardrock minerals, such as gold, silver, lead, iron, and copper, and uncommon varieties of mineral materials, such as the sand in the Fox claims, as the only minerals still subject to the mining law’s patent provision. 3. Interior requested that the portion of the appendix dealing with the Duval exchange be deleted because it is beyond the scope of the report. We continue to make reference to the Duval exchange because we believe the potential land exchange is an integral part of the report in that the factors prompting the Forest Service to pursue an exchange and its potential cost to the government illustrate why we believe the patent provision of the mining law should be eliminated. page34 GAO/RCEDSI-SPatentingofOregonDuner,MininBClaims Appendix II Comments From the Department of the Interior 4 This 1955 Act has always been referred to in case law, and other references as the following: a) An Act to Amend the Act of July 31, 1947 b) Public Law 167 c) the Act of July 23, 1955 d) the Multiple Use Mining Act of 1955 e) the Surface Resources Act of 1955--a misnomer As far as the citation goes, the proper citation is 69 Stat. 367, 30 U.S.C. Sec. 601. Sec. 611 is only the part of the Act of 1955 that refers to cOmmO" varieties. See comment 5 4. Referring to comments on page 12, it should be noted that Sec. 10 of the Oregon Dunes National Recreation Area Act withdraws the affected lands from location, entry, and patent under the US mining laws subject to valid existing rights (emphasis added). 16 U.S.C. Sec. 4602-8. Congress recognized that there may be valid activities taking place that were to be protected from a takings. 5. In reference to footnote 6, page 16, mining claims located prior to October 21, 1976, had to be recorded with the ELM on or before October 22, 1979, or else they would be considered abandoned and void (see 43 CFR 3833.1-l). Therefore, the last sentence of the footnote is true that before See comment 5 1976 BLM had no filing requirement on most public lands (PL 359 lands and O&C lands were some exceptions), but pursuant to FLPMA, after October 22, 1979, they had to file annually with ELM to maintain their mining claims. However, this point -is made on page 22 under "Recording." 6. On page 18, paragraph I, GAO states that the presence of a patented mining claim in a national recreation ares "illustrates the inconsistencies between the patenting provision of the mining law and federal stewardship requirements in other national resource legislation." See comment 8 The GAO points out on page 1, that these claims were properly located in 1959. This is before any of the legislation introducing the alleged inconsistencies between these two valid (multiple) uses of this land. The clsims were located prior to the Oregon Dunes Act of 1972, prior to the Wilderness Act of 1964, FLPMA of 1976, etc. The claims were in existence in the Oregon Dunes prior to the Act of 1972. Congress did recognize that there were valid existing rights in the area--see no. 4 above. Congress could have adjusted the boundaries to exclude the mining activity from the recreation area, and thereby avoiding conflict. However, by withdrawing the land, Congress restricted the uses of this area. Page 32 GAO/RCED-918 Patenting of Oregon Dunes Mining Claims Appendix II Comments Fmm the Department of the Interior 1 The FLPMA also calls for "the public lands [to] be retained in Federal ownership, unless...it is determined that disposal of a particular parcel will serve the national interest." 43 U.S.C. Sec. 1701(a)(l). The FLPMA also provides that "the United States receive fair rarket value of the use of the public lands and their resources unless otherwise provided for br statute.... "" 43 U.S.C. Sec. 1701(e)(9). [Emphasis added.1 It would seem that Congress 1) did not want to repeal or amend the Mining Law when FLPNA was passed, 2) did want to retain lands, unless it "as better for the national interest to dispose of the land, and 3) did "ant to receive fair market value for lands and their resources , unless otherwise provided for by st*tute. The GAO quotes FLPMA for support that the Mining Law and the management of other national resources are incongruent, and yet in that same Act, FLPMA is trying to provide guidance so a.6 not to preclude mining and other valid uses of the land, i.e., guidance for the multiple-use of the public lands, including mining. The GAO is not showing the whole picture. OTHER COMMENTS See comment 4. 1. Page 2, paragraph 1: "diligence" or "annual work" requirement should he "diligence" or "annual labor" requirement. See comment 5 2. Page 5, paragraph 1: II . ..GAO concluded in a March 1989 reportl..." --footnote numbering not clear ; number should be raised or typed as follo"s: J/. See comment 5 3 Page 12, paragraph 1: "Oregon Dunes National Recreation Area Act of March 23, 1972," also 86 Stat. 99, Public Law 92-260. SPECIFIC COMMENTS See comment 2 1. On pages 5, 10, and 26-27, the GAO emphasizes that the mineral patent process ss authorized by the 1872 Mining Law runs counter to other national natural resource policies as provided for in the Federal Land Policy and Management Act (FLPMA) of 1976. However, nowhere does the GAO report point out that FLPMA in Sec. 102(12) states that: "the public lands he managed in a manner which recognizes the Nation's need for domestic sources of minerals . ..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 public lands..." 43 U.S.C. sec. 1701(a)(lZ). The Mining and Mineral Policy Act of 1970 states that it is: . . . the continuing policy of the Federal Government in the national interest to foster and encourage private enterprise in (1) the development of economicslly sound and stable domestic mining, minerals, metal, and Page 30 GAO/RCED-91-8 Patenting of Oregon Dunes Mii Claims Appendix II Comments From the Department of the Interior supplementing those In the report text appear at the r end of this appendix United States Department of the Interior OFFICE OF THE SECRETARY WASHINGTON, DC. 10243 I . Mr. James Duffus, III Director, Natural Resources OCT 1 ? 1990 Management Issues General Accounting Office Washington, D.C. 20548 Dear Mr. Duffus: Thank you for the opportunity to comment on the General Accounting Office's See comment 1 (GAO) report, FEDERAL LAND MANAGEMENT,Oregon Dunes National Recreation Area: Patenting of Mining Claims Complies with Law (GA)/RCED-90-216). In general, we agree with the findings of the report. We are pleased to see that GAO concludes that the Bureau of Land Management (BLM) handled the Oregon Dunes case properly and consistently with all legal and administrative requirements. However, we disagree with the GAO implication that there are conflicts and inconsistencies between the 1872 Mining Law and the Federal Land See comment 2. Policy and Management Act of 1976 (FLPKA). The FLPMA does set a policy of Federal ownership of public lands and obtaining fair market value for jts IesOUrCeS. However, FLPMA also specifically excludes the 1872 Mining Law, and specifically the patenting provisions, from this policy, thereby, showing the support of Congress for continuing this type of activity on public lands. The FLPMA further states that the public lands will be managed so as to meet the need for domestic sources of minerals, and to implement the Mining end Minerals Policy Act of 1970. We recommend that the discussions in the GAO report regarding alleged inconsistencies be revised, to fully reflect that 1) the FLPMA excludes the Mining Law, and 2) the FLPMA does recognize the need for development of mineral resources on public lands. We further request that the portion of the appendix dealing with the Duval exchange be deleted as being beyond the scope See comment 3 of the report. If there are any further questions regarding the enclosed comments, please call Reed Smith, Chief, Division of Mining Law and Salable Minerals, at 208-4147. Assistant Secretary, Land and Minerals Management L Enclosure Page 28 GAO/RCED-91-S Patenting of Oregon Dunes Mining Claims Appendix I Time Line of Key Events in the Oregon Dunes Mining Claims and Patent Application Process Date Action McClarty patent application was based was common or uncommon The court’s guidance remams germane today 1977 March 31 The Forest Service Report of Mlneral Examination concluded that the Fox claims were not valid because a valuable dlscoverv had not been made prior to the date of wlthdrawal This report, how&er, did not comment on whether the sand was a common variety. April 18 The Forest Service requested that BLM Issue complalnts challenging the validity of the 10 Fox claims because the claim holders had not demonstrated that a valuable mlneral deposit had been located prior to July 18, 1961, the date of withdrawal of the lands from mlneral locatlon and entry November 4 BLM Issued complamts OR 17779~17886 challengmg the valldlty of the IO Fox claims on the basis of the lack of a dlscovery of a valuable mlneral deposit t3LM did not contest whether the sands were a common variety 1978 May 17 In a pre hearing conference before an admlnlstratlve law judge, attorneys for the claim holders and the government agreed that the sand in the claims was an uncommon variety and that this would not be an issue In the proceedings. September 19 A hearing took place before Interior’s Offlce of Hearings and Appeals on the challenge to the validity of the Fox claims (U S v Duval) 1979 October 19 The Office of Hearings and Appeals Issued a declslon upholdmg the valldlty of the Fox claims The Duvals were requtred to prove that they had a valuable mlneral deposit at the time of the wlthdrawal and at the time of the hearing The declslon was based on the fact that (1) sufflclent evidence was Introduced (much of It new) to rebut the government’s testimony that dIscovery was not made prior to wlthdrawal and (2) no contradictory evidence was presented about dlscovery at the time of the hearing. By the time of the hearing, the Duvals were selling sand at a proflt from their mlnlng operation near Coos Bay The Forest Service appealed this decision to IBLA 1981 March 26 IBLA Issued a declslon (53 IBLA 341, 1981) that afflrmed the declslon of the admlnlstratlve law judge upholdlng the valldlty of the Fox claims The Forest Service said that at this point they had exhausted all possible remedles in the admlnlstratlve law process. 1982 January 27 Duval filed an appllcatlon for patent for Fox claims l-10. comprising 1,480 acres May 27 BLM Issued a declslon voldlng 480 acres of the Fox claims that had been located on land acquired from lndlvldual cltlzens, businesses, and nonfederal governmental organlratlons and not covered by the mlnlng law This left 1,000 acres for conslderatlon In the patent appllcatlon The Duvals appealed this declslon to IBLA October 12 IBLA Issued a declslon (68 IBLA 1, 1982) that afflrmed BLM’s declslon of May 27 1986 September 22 BLM requested an oplnlon from Interior’s Reglonal SolIcItor to establish that title was vested with the claim holders (contmued) Page 26 GAO/RCEDSl-9 Patenting of Oregon Dunes Mining Claims Appendix I Time Line of Key Events in the Oregon Dunes Mining Claims and Patent Application Process Date Action 1959 March Senator NeubFgFpr&posed a natronal seashore in the Oregon Dunes September- Maurrce Duval located Dreamer clarms l-25 on 3,160 acres just north of December Coos Bay wrthtn the proposed national seashore area December 30 Maurice Duval located Fox clarms l-10 on 1,480 acres on the north sprt of the mouth of the Umpqua River wrthrn the proposed natronal seashore area 1960 July 6 The Forest Service notrfied tfneouvalsthat It be;eved the sand rn the area of the clarms was a common varrety and thus not subject to the Mrnnq Law of 1872 1961 July 18 BLM wrthdrew from mineral entry about 18,000 acres between the Sruslaw Rover and Coos Bay 1962 No specrfrc date Interior’s Bureau of Manes Issued lnformatron Crrcular 8112. lndustrral Srlrca Deposrts of the Pacrfrc Northwest This report establ&iZT%Zof 82 srlrca deposrts evaluated rn the Pacrfrc Northwest, 37 were of hrgh qualrty and 16 were large enough to be rndustnal silrca resources 1963 September 30 The Sruslaw National Forest requested a mineral examrnatron and/or tnrtratron of rnvalrdatron proceedrngs on the Dreamer clarms. 1964 No specrfrc date The Bureau of Manes Issued Report of lnvestrgatron 6484, Benefrcration Studres of the Oregon Coastal Dune Sands for Use as Glass Sand I he rnformatron rn this report was used extensrveiy rn the 1Ybb Forest Servrce Report of Mrneral Examrnatron on the Dreamer ciarms and was the basrs of testrmony grven by both sides rn the proceedings challengmg the valrdity of the clarms 1966 February 2 The Forest Servrce’s Report of Mrneral Examrnation recommended that the Dreamer clarms be challenged on the basts ot [l) lack of drscovery of a valuable mrneral deposrt due to farlure to establish a market as of July 18. 1961, the date of wrthdrawal from mrneral entry and (2) the wrdespread occurrence of srmrlar srlica sands along the Oregon Coast, whrch makes the sand on the clarms a common variety and not under the Mrnrng Law of 1872 Thus report also noted that Dreamer claim No 15 had been located on private land and was therefore Invalid May 18 BLM Issued complarnts OR 018149-018153 declarrng the 24 remarnrng Dreamer clarms null and vord because a valuable mineral had not been drscovered and the materral on the clarms was a common variety not subtect to locatron October 9 A hearing took place before BLM’s Office of Heanng Examrners on the valrdrty of the Dreamer claims (U S. v. Maurrce Duval et al) 1968 March 15 The Office of Heanng Examrners Issued a decrsion agarnst the clarm holders Because the Pacrfrc Northwest, and the Coos Bay area rn particular contarned a vast quantity of sand surtable for glass-making, (continued) Page 24 GAO/RCED-91-S Patenting of Oregon Dunes Mining Claims Chapter 2 Patenting Process Meets Legal and Administrative Requirements lands to meet the demands for domestic sources of minerals and fos- tering and encouraging private enterprise to develop these resources. We recognize that FLPMA exempts the Mining Law of 1872 and, specifi- cally, its patent provision from current national natural resource poli- cies relating to federal stewardship of public lands and have added additional language to emphasize this point. However, it should be noted that patenting is not essential for minerals exploration and development because other provisions of the mining law give claim holders the right to use the land for mining-related activities. In addition, our 1989 report also identified (1) a number of laws enacted subsequent to FLPMA that accommodate mining while requiring that the federal government retain title to the land, subject to valid existing rights, and (2) other legislation that removed fuel and common variety minerals leaving hardrock min- erals, such as gold, silver, lead, iron, and copper, and uncommon vari- eties of mineral materials, such as the sand in the Fox claims, as the only minerals still subject to the mining law’s patent provision. Page 22 GAO/RCED9143 Patenting of Oregon Dunes Mining Claims chapter 2 Patenting Process Meets Legal and Administrative Requirements from the beach. The county zoning plan covering the patented lands is even more restrictive in that it would prohibit not only mining but also residential development in this dunes area. Thus, the options for developing the patented lands are limited. On this basis, Forest Service staff have preliminarily estimated the value of the Duvals’ patented land at about $350,000. The Duvals, on the other hand, believe the exchange value should recognize the mineral value of the sand. If the mineral value is recognized, the exchange value would be much higher than the value for land whose use is restricted. For example, in a 1987 mineral evaluation of the Fox claims conducted for the Forest Service, the author, a consulting mineral geologist, estimated that the Fox claims contained between 13 and 25 million tons of silica sand and that the cost, selling price, and resulting profit that the Duval’s were experiencing at their existing operation, which is located near the Fox claims, provided a rough indication of the profit they could obtain from the Fox sand. On the basis of a profit figure of about $6 per ton, 19 million tons of sand, a 95-year operating life, and a lo-percent discount rate, we estimate t,hat the Fox patent could be worth $12 million3 The transfer of 780 acres of public lands within a national recreation Patenting Is Not area into private ownership illustrates why in our 1989 report? we con- Consistent W ith More cluded that the patent provision of the Mining Law of 1872 runs counter Recent National to more recent national natural resource policies relating to federal stewardship. These policies call for the federal government to maintain Natural Resource ownership of public lands and to obtain fair market value for public Policies resources. Moreover, patenting is not essential for minerals exploration and development because other provisions of the mining law give claim holders the right to USCthe land for mining-related activities. % our present value calculatwn we used 19 nulhon tons of sand (the mid-point of the range in the 1987 mineral evaluation of the Fox claims), a $6 per ton profit (a conservative figure within the range discussed in the mmeral waluation), a 95.year operating life, and a 10.percent discount rate. The 95.year operatmg life 1s an approximation that takes into account the amount of sand available to be mined and the market demand for the sand. At current rates, 10 percent is between the govern- ment’s borrowing cost and private sector capital costs (and expected returns). We did not conduct sensitivity analyses on the parameters of the valuation. However, larger estimates of the tons of sand and the profit per ton and a lower discount rate would produce a higher valuation. Smaller estimates of the tins of sand and the profit per ton, and a higher discount rate would produce a lower valuation. 4Federal Land Management. The Minmg Law of 1872 ?ieeds Revision (GAOIRCED-89-72, Mar. 10, 1989). Page 20 GAO/RCED-91-S Patenting of Oregon Dunes Mining Claims chapter2 Patenting Process Meets Legal and Administrative Requirements file the affidavit with BLM as well as with the county recorder’s office. Under certain conditions, such as those in which legal impediments pre- vent the work from being done, the claim holder may request a defer- ment of the annual work requirement, but must file a notice of intention to hold the mining claim. l Patenting. To patent a mining claim, the claim holder must prove that at least $500 of development work has been performed for each claim and that each claim to be patented contains a valuable mineral deposit, i.e., one that can be extracted and marketed at a profit, and provide the doc- umentation required by federal regulations. We found that BLM had documentation to support compliance with the legal and administrative requirements noted above. The evidence we reviewed also shows that when the validity of information submitted by the claim holder was challenged, BLM requested and received additional information verifying that the requirements had been met. Proof of a Valuable Under the provisions of the Mining Law of 1872, the question of Mineral Deposit Was whether a valuable mineral deposit has been discovered can arise when the validity of a claim is challenged by the government or when a patent Established application is filed by a claim holder. In addition, if a mining claim is located within an area that is subsequently withdrawn from mineral entry, the claim holder must also prove that a valuable mineral deposit has been discovered as of the date the land was withdrawn. For the Fox claims, discovery was required and established at all three of the above points. On November 4, 1977, BLM issued a complaint chal- lenging the validity of the Fox claims because a valuable mineral deposit had not been discovered as of 1961 (the year the lands were with- drawn). In its answer to the complaint, the Duvals proved to both Inte- rior’s Office of Hearings and Appeals and to Interior’s Board of Land Appeals that a valuable mineral deposit had been discovered as of 1961, and as of the date of the challenge. In addition, during the patent review process the Duvals proved that the claims contained a valuable mineral deposit as of that time. When the state of Oregon’s Department of Land Conservation and The CZMA and the Development learned that a mining patent was to be issued for the Fox Patent Process claims, it requested that BLM provide either the consistency determina- tion or the go-days notice called for by the CZMA. Page 18 GAO/RCEDBl-O Patenting of Oregon Dunes Mining Claim Chapter 2 Patenting Process Meets Legal and Administrative Requirements for the sand prior to withdrawal-a key factor in meeting the require- ment for discovery of a valuable mineral deposit. The initial BLM hearing examiner’s decision agreed with that of the government, and the Dreamer claims were ruled invalid in 1968. The claim holder appealed this decision, but BLM'S Office of Hearings and Appeals upheld it. A further appeal to the Interior Board of Land Appeals was also decided in favor of the government. The Board’s deci- sion, however, did not rule on the question of whether the sand was uncommon. Rather it ruled that because the claim holder had not proven that a market existed at t.he time the lands were withdrawn from min- eral entry, the claims did not meet the valuable mineral deposit test, and therefore the Dreamer claims were null and void. Fox Claims Were In 1977, the Forest Service reviewed the Fox claims to determine whether they too could be invalidated. However, before the Forest Ser- Challenged but vice challenged the Fox claims, a court decision reviewed, approved, and Subsequently Patented further clarified the requirements which the Secretary of the Interior had established for determining whether a material listed in the Mul- tiple IIse Mining Act is common or uncommon.’ The court held that deposits of materials listed in the act as common variety minerals can be determined to be uncommon if their unique properties give them special and distinct value, and that value leads to a higher price or lower pro- duction costs. Given this legal precedent and the Forest Service minerals examiner’s conclusion2 that the sand had unique properties that made it suitable for ‘In McClarty v. Secretary of thr Intrnor, 408 F.Zd 907,908 (9th Cir. 1969) the following guidance w+.s used for determinmg whrthrr andesite (a building stone) on Forest Serwce land was common or ,111w”mlo” I There must be a comparwn ctf the mineral deposit in question with other deposits of such minerals gmerally %.The mmcral deposit musf hake a muqoe property. 4 If the special value IS fat- w(.11 uses to which ordinary vaneties of the mineral are put, the deposit must have wme distinct and special value for such use. 6. The distinct and specul vale must bc reflected by the higher price which the material commands m rhe marketplace or by Iwvw production cost. ‘i2lthough we did not exan~mc the or~gmal geologic data in detail, we reviewed the minerals exam mer’s report and concludcvl that rhr proper steps were taken and the report’s conclusions seemed appropi-Em. Page 16 GAO/RCED-91-8 Patenting of Oregon Dunes Mining Claims Chapter 1 htroduction Interior and the Forest Service provided written comments on a draft of this report. Interior’s comments are presented and evaluated in appendix II, and Forest Service’s comments are presented and evaluated in appendix III. Page 14 GAO/RCED-914 Patenting of Oregon Dunes Mining Claims Chapter 1 Introduction Figure 1.2: View of the Oregon Dunes National Recreation Area Source U S Forest Serwce S~uslaw National Forest asked that we provide a chronological case study from staking of the claims through patent issuance. (See app. I for the chronology.) To evaluate the government’s determination that the sand on the claims was an “uncommon variety” and therefore covered under the Mining Law of 1872, we reviewed the transcripts and related documents associ- ated with the various reviews within Interior’s administrative review process for the Fox and Dreamer claims and with associated appeals for the Dreamer claims. We reviewed the legal documents prepared as part of both proceedings in which the validity of the claims was challenged and interviewed thr, attorney who represented the Forest Service in both proceedings. We also reviewed the key administrative and court deci- sions that comprise the case law on common variety minerals. To determine whether the required legal and administrative steps leading to patenting were followed, we identified the required steps from appropriate laws and regulations and reviewed agency documents to assesscomplianccl with each. Specifically, we took the following measures: 1) To determine that, the mining claims had been properly located and recorded, we reviewed the copies of the Notice of Location of Mining Claims that had been f’ilcd with the Douglas County, Oregon recorder’s Page 12 GAO/RCEDSl-8 Patenting of Oregon Dunes Mining Claims Chapter 1 Introduction content, M r. Duval believed that it was suitable for making some types of glass as well as for use in the foundry industry.” Because of increasing recreation on the dunes, RLM withdrew about 18,000 acres in the Siuslaw National Forest from mineral entry in 1961--thus prohibiting exploration and the filing of new claims. Claim holders prior to the date of withdrawal, however, maintain valid existing rights to their claims. In March 1972 Public Law 92-260 estab- lished the Oregon Dunes National Recreation Area, setting aside a 40- mile strip between the Siuslaw River and Coos Bay for recreation pur- poses. The area became a part of the Forest Service’s system of national recreation areas. The map in figure 1.1 shows the location of the two sets of mining claims in the Oregon Dunes National Recreation Area. The extensive sand dunes just inland from the beaches are the recrea- tion area’s most important feature and, according to the Forest Service, helped attract over 2 million visitors in 1989. The Forest Service man- ages the recreation area to provide for public recreation and to conserve scenic values, while maintaining the integrity of the environment. It manages the dunes area in which the patented Fox claims are located as a roadless, isolated area. The area is noted for its quiet and scenic beauty and is also used by much wildlife, including migrating water- fowl. Figure 1.2 provides a view of the recreation area. The Chairman of the Subcommittee on Mining and Natural Resources, Objectives, Scope, and House Committee on Interior and Insular Affairs, expressed concern Methodology about the issuance of a patent for mining claims for sand within the Oregon Dunes National Recreation Area. Specifically, he asked that we (1) examine the government’s determination that the sand on the claims is an “uncommon variety” and therefore covered under the patenting provision of the Mining Law of 1872 and (2) determine whether the fed- eral agencies involved and the claim holder followed the legal and administrative requirements for patenting. As part of our review of the legal and administrative requirements, the Chairman’s office asked us to address two specific procedural questions: (1) whether the patent appli- cation contained proof of a valuable mineral deposit at the critical dates during the process and (2) whether HLM was required by the CZMA to notify the state of Oregon that it was issuing the subject patent. He also %.nd which can be used tu make glass has specific properties that distinguish It from sand that can only be used for constructmn purposes. These properties are (1) very high silica content, (2) only a trace of unwanted minerals and no orgamc materials, (3) even sand grain size, and (4) no clay in the sand Page 10 GAO/RCED-91-O Patenting of Oregon Dunes Mii Claims Chapter 1 Introduction On October 10, 1989, the Department of the Interior’s Bureau of Land Management (RLM) transferred ownership of 780 acres of federal land in the Oregon Dunes National Recreation Area to private ownership under authority of the Mining Law of 1872. The Chairman of the Subcom- mittee on Mining and Natural Resources, House Committee on Interior and Insular Affairs, asked us to determine whether, in making this transfer, the claim holder and the federal government followed legal and administrative requirements. The Mining Law of 1872, as amended, (30 U.S.C. 22 et seq.) was enacted Background to Dromote the exploration and development of domestic mineral resources. It allows citizens and businesses to prospect for and mine cer- tain valuable mineral deposits on federal lands not closed or withdrawn from mining. The law contains several provisions that make it attractive to prospectors and claim holders. First, citizens do not have to have the government’s permission t,o locate mining claims or to prospect for min- erals so long as they do not cause any significant disturbance to the sur- face of federal lands. Second, claim holders can preserve the rights to their claims by certifying annually that at least $100 worth of drilling, excavation, or other development-related work has been done for each claim. Third, valuable minerals can be extracted without paying the fed- eral government any fees or royalty.] And fourth, claim holders have the option of obtaining fee simple title’ to both the land and the minerals by patenting the claims for either $2.50 or $5.00 an acre-an amount that approximated the fair market value for western grazing and farm land in 1872. Patenting a claim requires proof that a valuable mineral deposit has been found (called discovery), and that at least $500 has been spent to develop the claim. The Department of Agriculture’s Forest Service and Interior’s HLMcan question the validity of mining claims on their respec- tive lands. However, I3I.M is responsible for maintaining the records asso- ciated with mining claims on all public lands, conducting the administrative processes for determining the validity of these claims, and issuing patents. Over the decades legislation has reduced the number of minerals cov- ered by the mining law. For example, section 3 of the Act of July 23, ‘A royalty is an amount braid by B lessee for minerals produced, usually calculated as a percentage of WlW. “Fee simple title means ac,qulring the ownership rights and interests wsoclated with a propaty. Page 9 GAO/RCEDBl-8 Patenting of Oregon Dunes Mining Claims Contents Executive Summary 2 Chapter 1 8 Introduction Background History of the Oregon Dunes National Recreation Area 8 9 Objectives, Scope, and Methodology 10 Chapter 2 15 Patenting Process Sand in the Patented Mining Claims Was Determined to Be 15 an Uncommon Variety Meets Legal and The Legal and Administrative Requirements of the Mining 17 Administrative Law of 1872 Were Met Requirements The CZMA and the Patent Process 18 Forest Service Seeks to Restore Patented Lands to Federal 19 Ownership Patenting Is Not Consistent With More Recent National 20 Natural Resource Policies Conclusions 21 Agency Comments and Our Evaluation 21 _~-. Appendixes Appendix I: Time Line of Key Events in the Oregon Dunes 24 Mining Claims and Patent Application Process Appendix II: Comments From the Department of the 28 Interior Appendix III: Comments From the Forest Service 36 Appendix IV: Major Contributors to This Report 39 Figures Figure 1.1: Duval Claims in the Oregon Dunes National 11 Recreation Arca Figure 1.2: View of the Oregon Dunes National Recreation 12 Area Abbreviations BLM Bureau of Land Management GAO General Accounting Office IBLA Interior Board of Land Appeals FLPMA Federal Land Policy and Management Act CZMA Coastal Zone Management Act page 6 GAO/RCED91-8 Patenting of Oregon Dunes Mining Claims Executive Summary Principal Findings Sand on Fox Claims Is In 1977, the government reviewed the Fox claims to determine if they could be invalidated. Determining whether the sand in the claims was Subject to Mining Law of subject to the mining law and thus patentable was a key factor in the 1872 determination. An earlier court decision had held that deposits of common variety minerals, as identified in the Multiple USCMining Act of 1955, can be determined to be uncommon if they have unique properties that give them distinct and special value. The federal minerals examiner who evaluated the claims concluded that the sand in the claims had such unique properties, and thus the sand was subject to the mining law. Although GAOdid not examine the original geologic data in det,ail, it reviewed the minerals examiner’s report and concluded that the proper steps were taken and t,he report’s conclusions seemed appropriate. Legal and Administrative The mining law contains various requirements governing locating, recording, maintaining. and patenting mining claims. GAO found docu- Requirements Were Met mentation that tht, claim holder and the federal government met these requirements. GAOspecifically focused on whether the claim holder established that a valuable mineral deposit-a key requirement for pat- enting-had been discovered. The question of whether a valuable min- eral deposit has been discovered can arise (1) when the government challenges the validity of a claim, (2) when a claim holder files a patent application, and (3) M hen land is withdrawn from mineral entry. For the Fox claims, discovery was established at all three points. GAO also believes that the federal government’s position that it was not required under the Coastal Zone Management Act to notify the state of the pro- posed patenting is legally supportable. The transfer of property title, of itself, does not changtb th<i way the land is being used. Patenting Is Inconsistent Although the claim holder and the federal government met the require- With More Recent National ments for patenting. transferring these lands to private ownership illus- trates why GAOconcluded in a March 1989 report’ that the mining law’s Natural Resource Policies patent provision runs counter to more recent national natural resource policies relating to federal stewardship. Patenting is not essential for minerals exploration and development becnauseother provisions of the Page 4 GAO/RCED-91-S Patenting of Oregon Dunes Mining (Iaims Executive SUmmary The Mining Law of 1872 allows U.S. citizens and businesses to locate Purpose mining claims on most federal lands and then to obtain full title to these lands through a process called patenting. In 1969, mining claims were filed for silica sand along the Oregon coast. In 1961, the Department of the Interior’s Bureau of Land Management removed about 18,000 acres of national forest lands, including the mining claims, from further min- eral entry. In 1972, the Congress established the Oregon Dunes National Kecreation Area which included those withdrawn lands. On October 10, 1989, at the request of the claim holder, the federal government trans- ferred title through the patent process to 780 acres of mining claims in this scenic and valuabltt area. Concerned over the transfer of land within the recreation area to pri- vate ownership, the Chairman, Subcommittee on Mining and Natural Resources, House Committee on Interior and Insular Affairs, asked GAO to (1) examine the federal government’s determination that the sand on the claims is an “uncommon variety,” which brings the claims under the Mining Law of 1872 and therefore allows patenting and (2) determine whether federal agencies and the claim holder followed the legal and administrative requirements for patenting and whether the government was required by the Coastal Zone Management Act to notify the state of Oregon that it intended t.o patent the claims. The Mining Law of 1872 was enacted to promote exploration and devel- Background opment of domestic mineral resources. Over the decades legislation has reduced the number of minerals covered by the mining law and provided protections to keep federal lands in public ownership. For example, the Multiple IJse Mining Act of 1956 removed common varieties of sand, stone, gravel, pumice, pumicite, clay, and cinders from the mining law’s patent provision and required instead that the land containing such materials remain in public ownership. The act also gave federal agencies the authority to sell the mineral materials on the lands. However, the 1955 act allows deposits of these materials, if they have unique proper- ties that give them special and distinct value, to remain under the mining law, giving claim holders the right to seek a patent to both the land and the materials. In addition, while not reducing claim holder’s rights under the Mining Law of 1872, the Federal Land Policy and Man- agement Act of 197G established a broad national policy that calls for the federal government to maintain ownership of public lands and obtain fair market \ alum,for its resources. Page 2 GAO/RCED-913 Patenting of Oregon Dunes Mining Claim
Oregon Dunes Recreation Area: Patenting of Mining Claims Complies With Law
Published by the Government Accountability Office on 1990-12-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)