Hardrock Mining on Federal Lands

Published by the Government Accountability Office on 1990-09-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                        United   States General    Accounting    Office

For Release             Hardrock      Mining      on Federal      Lands
on Delivery
Expected    at
9:45 a.m. EDT
September     6, 1990

                        Statement    of
                        James Duffus      III,   Director,
                        Natural    Resources     Management    Issues
                        Resources,     Community,      and Economic
                        Development     Division

                        Before    the
                        Subcommittee       on Mining       and
                        Natural     Resources
                        Committee     on Interior         and    Insular   Affairs
                        House of Representatives

                                                                                 GAO Form 160 (12/87)
Mr.     Chairman       and Members of the                     Subcommittee:

         We are pleased                to be here            today     to discuss            our work          to date          on
various      issues          relating        to the Mining               Law of 1872 and provide                          our
views      on certain           provisions            of H.R.         3866,      the      "Mineral         Exploration
and Development               Act      of 1990".

          Over the       last         4 years       GAO has reported                 on Several            aspects         of
the Mining          Law of 1872 and its                      administration               and has made a
number      of recommendations                     to the          Congress      and the         federal          land-
managing       agencies.=                We have reported                that       the    existing         annual         work
requirement           no longer           ensures           that     mining      claims        are developed               and
that      some claims           are being           used for          nonmining           activities.               In order
to promote          mineral           development            and ensure          that      claims        are available
to legitimate           miners,           we have recommended                    that      the    Congress            require
claim      holders       to pay the               federal          government        an annual           holding          fee
in lieu      of the          existing        annual          work     requirement.               We also          have
reported       that      the         Department        of the         Interior's           bonding         policy         has
not     ensured       that      mining       operations              on its      lands       are reclaimed                and
recommended           that      it      require       some form of financial                      guarantees              to
help      ensure      reclamation.                 In addition,           because          we found         that       the
mining      law's      patent           provision           has permitted            valuable           federal        lands
to pass      into      private           ownership           for     a fraction           of their         value,         we
have recommended                that      the      Congress          eliminate          patenting.             This

ISee attachment               I for       a listing            of recent           GAO reports           and
would      make the           Mining          Law of 1872 more consistent                           with          current
national         natural         resource          policies           and preserve              the    government's
opportunity            to obtain              revenues        for     minerals        extracted              from          its

         In our view,             H.R.         3866 would            accomplish           the    intent            of our
recommendations                that      we have made to the                     Congress.             The bill's
requirement            for     graduated           diligent           development            expenditures                   or
graduated         payments            in lieu          of development              should        encourage                 timely
development            of mineral              resources            and discourage              unauthorized
activities          on federal                lands.       The bill's            requirement               for       financial
guarantees          covering            all     mining        operations           that      will      cause
significant            surface          disturbance            should      ensure           reclamation               of land
scarred       by mining           operations.                 In addition,            recent          action          taken         by
Interior's          Bureau        of Land Management                     (BLM) indicates                   that       it         is at
least      partially           adopting           our recommendation                  to require                  financial
guarantees          to help           ensure       reclamation.                 Finally,         the       bill       will
eliminate         the        patent      provision            thereby      preventing               lands          from
passing       out      of     federal          ownership            and keeping            open the          opportunity
for     the   government              to obtain          revenues         for      minerals           extracted                  from
its     lands.


         The Mining            Law of 1872 was enacted                          to promote            the         exploration
and development                of mineral              resources         on federal             lands.             These lands

cover        approximately               688 million              acres,         primarily        in the western
United        States.             The principal               federal           land-managing             agenCieS--

Interior's               BLM and the           Department              of Agriculture's                Forest          Service--
manage about               270 million               and 191 million                 acres,      respectively.                 This
represents               about      67 percent             of all        federally           owned lands.               Each
agency        is    responsible               for     the     surface           management        of mining-related
activities               on its      lands.

         Under           the mining           law,     U.S.       citizens           and businesses              can freely
prospect           for     hardrock           minerals2           and uncommon varieties                       of mineral
materials3               on federal           lands        not    specifically               closed       or withdrawn
from mining.                They can file                  claims        with     BLM (for        a fee of $10
each),        giving        them the           right        to use the            land       covered       by a claim            for
mining-related                   activities           and the          right      to sell        the      minerals
extracted           without          any monetary                compensation            to the        federal
government.                To preserve               the    rights         to their          claims,        claim       holders
must certify               that      they      have annually                performed          at least          $100 worth
of drilling,               excavating,               or other          development-related                   work       (often
referred           to as the           act's         "diligence"            or "annual           workI'       requirement)
for     each claim.

2Hardrock           minerals           include         gold,          silver,        lead,     iron,        and copper.
3The Surface Resources Act of 1955 removed mineral                materials,  often
referred    to as common variety      minerals,     such as sand, stone,
gravel,   cinders,     and clay from coverage under the Mining Law of
1872.    However, when these materials          have properties     that give them
special   and distinct     value,  they are considered        uncommon and are
subject   to the mining law.

          While      the mining                law does not            clearly          specify          which      types     of
surface          activities              are authorized               and which           are not,          the     Surface
Resources           Act    of 1955 restricted                     those           activities            to prospecting,
mining,          or processing                 operations         and l'uses            reasonably           incident
thereto."            The act,             however,        left       to the          federal           land-managing
agencies          the     task         of determining             what        activities               are reasonably
incidental            to mining.

          Once mining                 activities         are completed                 on BLM and Forest                  Service
lands,       these        agencies             must ensure            that        mine operators             reclaim         the
land.        Finally,            if      specific        requirements                are met,           the mining          law
allows       claim        holders             to obtain        fee simple              title4          to both      the     land
and the mineral                  rights         by patenting                the    claims,            depending      on the
type      of claims,             for       either      $2.50         or $5.00          an acre--amounts                closely
approximating                 the      fair     market      value           of western            grazing        and farm
land      in 1872.


          The purpose                 of the        $100 annual             work     requirement            is to
encourage           mineral            development.              However,            in March           1989 we reported
that      this      requirement                no longer         accomplishes                  this     objective         because

4Fee simple title  means acquiring                                    all     rights           and interests
associated  with a property.

the     amount        of work            required       is too         small        to promote               mineral
development            and the            annual       work     requirement                is    difficult             to
enforce       and is          often        not met.            While        no hard         data      exist,           BLM and
Forest       Service          officials             estimate         that        over      80 percent            of the        1.2
million       claims          considered             "active"          are not being                explored,
developed,            or mined.

          Because       the mining               law makes it                 relatively           easy and
inexpensive            for        claim      holders       to       file       and preserve             the         rights     to
their      claims,           some        of the      claims         not being            actively            explored,
developed,            or mined            are being        used for              unauthorized                residences,
nonmining        commercial                operations,              illegal         activities,               or speculative
activities            not     related         to legitimate                 mining.             In August            1990 we
reported        that         agency        officials           estimate           that      of the           over      662,000
mining       claims          in    3 states--Arizona,                      California,             and Nevada--about
1,600      have known or suspected                         unauthorized                  activities            occurring            on

          Unauthorized              activities           create            a variety            of problems,
including        blocked            access          to public          land       by fences           and gates:              safety
hazards       to those             using      the      land,        such as threats                 of physical
violence:        environmental                  eyesores            caused        by abandoned                vehicles,
dumped garbage,                   and road          construction:                environmental                contamination
caused       by the          unsafe        storage       of hazardous                wastes;          investment              scams

that      defraud       the        public:          and increased                costs      to reclaim               damaged
land      or acquire              land     from claim           holders           intent         on profiting                from

holding          out     for     monetary        compensation                from     parties          wishing          to use
the     land      for     other         purposes.

          One hundred              and eighteen           years        ago,      the        $100 annual               work
requirement              represented            a sizeable            annual         investment--the
equivalent              to about          25 days of labor.                   Today,         $100 represents                   a
nominal          yearly         expense--       about     an average             day's        work.            To develop           a
claim       today,        the      Office       of Technology                Assessment              estimates          that       an
average          annual         expenditure           of several             thousand             dollars       per acre           is

           In March            1989,      we recommended              that     the         Congress         amend the
mining          law to require                claim     holders        to pay the                 federal       government
an annual          holding             fee    in place      of the           existing             annual       work
requirement.                   And in August            1990,        we recommended                  that      this     annual
holding          fee be graduated                 over    time.          Among other                 things,          we believe
that       if    implemented,                our recommendation                 should            reduce       the     number of
invalid,          inactive,               and abandoned             claims      and reduce              the     number of
unauthorized               activities           occurring            on them.              This      would,       in turn,
promote          mineral          development           by making            these         claims       available            to
legitimate              miners.

          H.R.         3866's      provisions           doubling         the        size     of claims            to 40 acres
and requiring                  diligent        development            expenditures                 ranging        from       $800
to     $6,400       per        claim       each year      and,        after         5 years,          the      option        of
making          graduated          annual       payments            ranging         from     $800 to $3,200                  per

claim        in lieu      of diligent             development,               would          meet the         intent         of our
recommendations.                  The bill          also      contains          requirements                 that      should
facilitate           enforcement            and help          promote          legitimate             mineral


         Not only         do unauthorized                  activities            scar        the     land,         mining
operations,            by their         very       nature,         disturb           it     and,     if     left
unreclaimed,             create        environmental               and public               safety         hazards.          In an
April        1988 report,            we estimated             that,       as a result                of hardrock
mining        operations          in    11 western            states,          over         280,000         acres      relating
to abandoned,             suspended,              or unauthorized                operations                on federal
lands        needed      reclamation              at an estimated                cost        of $284 million.

         The Forest            Service         requires           financial               guarantees          to cover
reclamation            costs      wherever          significant               disturbance                 is likely         to
occur.         As we reported               in August             1987,       this         requirement             was working
effectively            to ensure           reclamation.                 BLM's land             protection             program,
however,           has been far            less     demanding.                Although             BLM could,          it
rarely        required         financial           guarantees             or bonds to ensure                       reclamation
of mining           operations          involving            more than           5 acres            and its
regulations            did     not     permit       it     to require            financial                guarantees         for
operations            involving         5 or fewer            acres        unless           the     operator          had been
cited        for    noncompliance              in the past.                Because            of the        costs

involved       in reclaiming                        mining      sites,       and the     Forest         Service's
success       in using                  financial          guarantees          to ensure        reclamation,            we
recommended               that          BLM adopt          a bonding         policy,     similar         to the        Forest
Service       policy,              which         requires        operators           to post     financial
guarantees           if         their        operations,              regardless       of size,         are likely           to
cause      significant                   land       disturbance.

        On August                 14,      1990,        BLM issued          a revised       policy        requiring
bonding       of all             mining          operations             involving      more than          5 acres       as
well    as for            all      operations              utilizing         cyanide     and all          operators          with
established               records              of noncompliance.                BLM's revised             policy       goes a
long    way toward                 meeting           the     intent        of our earlier             recommendation.
However,       it         does not              require        financial        guarantees            to cover
reclamation               costs          for     the vast         majority          of mining         operations--those
involving           5 or fewer                  acres.         In 1988,        these    operations           comprised
over    80 percent                 of new mining                operations.

        We still                believe          that      BLM should          adopt    a bonding          policy
requiring           operators                  to post       financial         guarantees        if     their
operations,               regardless                of size,          are likely       to cause         significant
surface       disturbance,                      and support             the provision          in H.R.          3866
mandating           that          Interior           require           such guarantees.

          Over the          years,         several          federal         laws have established                         policies
that      call      for     the     federal          government             to maintain                 ownership         of
public          lands      and obtain             fair     market         value          or adequate             compensation
for      the     resources          it     controls.              However,           in March            1989,     we reported
that      through          the    mining          law's      patent         provision,              the     government           has
sold      about         3.2 million             acres      of land          for      $2.50        or $5.00          an acre.
We reviewed               20 patents            issued       since        1970 for              which      the    government
received          less      than         $4,500      but     which        in      1988 were estimated                     to be
worth      between          $13.8         million         and $47.9            million.

          Moreover,           when federal                lands        pass       into     private          ownership
through          patenting,              the    federal          government              also     loses         forever        the
opportunity               to obtain            revenues          from hardrock                  minerals         extracted
from these              lands.           BLM and the             Forest        Service           estimate         that     roughly
$4 billion              of hardrock             minerals          were extracted                  from      federal        lands
in     1988.        Although             the    government             has never            collected            revenues        from
the      sale     of these          minerals             as it        does for           fuel     and common variety
minerals,           we question                whether       the       government               should      be precluded
from doing              so in the          future.           We have recommended                         that     the     Congress
amend the Mining                   Law of 1872 to eliminate                              the     patenting          of both
hardrock          minerals          and the          land        required          to mine them.                  This     change
would      permit          the     land        to remain          under        federal           ownership          and provide

the     government             the       opportunity               to collect           revenues          for      the minerals

          The mining               law's        patenting           provision           also      applies          to uncommon
varieties             of mineral               materials.             Our ongoing              work,      being          done for
this      subcommittee,                  has shown that                  780 acres          of mining            claims            within
the     scenic            Oregon        Dunes National                Recreation            Area have passed                       into
private            ownership            for      a small          fraction         of their        estimated              value
because            they     contain            an uncommon variety                    of sand covered                    by the
mining            law's     patent            provision.            We believe            that     this         is another
example            of how the            patent          provision           of the mining              law runs               counter
to other            national            natural          resource          policies         and legislation
relating            to     federal            stewardship.

          Less than               a year         ago,      the     claim       holder       acquired            the      land       from
the     government                for    $1,950.            The Forest             Service        believes              that       the
presence            of private                lands      within       the      recreation          area         will       limit

its     ability            to manage adjoining                       federal        lands        and that          the
activities                which      may       occur       will      be inconsistent               with         the      scenic           and
other       values          that        contribute            to the public's                  enjoyment               of the       area.
Thus,        it      is    attempting             to reacquire               the    patented           lands       through            a
land       exchange.               Such an exchange                   will      require          agreement              on the
value        of the patented                     land.        Preliminary             estimates           are that              the
value       of the          land        could         range       from about          $350,000          to possibly                 as
much as $12 million.

         H.R.       3866 proposes           to eliminate               the     patent            provision         of the
Mining      Law of         1872 thereby             retaining          public            lands      in federal
ownership.              In addition,             this     bill      would          remove uncommon varieties
of mineral          materials          from       the mining           law.          Thus,         lands       containing
materials           such as sand,               stone,      gravel,         cinders,             and clay        could        no
longer      be claimed            under     the mining              law and these                  materials          would        be
sold      to the        highest     bidder          under        the Materials               Act      of    1947.         These
provisions           are consistent               with      our recommendations                       intended           to
ensure       that       the   mining       law      be    amended to conform                       with     current
federal         laws      and policies            that      call      for     the        federal          government          to
maintain         ownership         of public             lands      and obtain             fair       market       value       or
adequate         compensation             for     the     resources           it     controls.

          In conclusion,            while          our work has identified                           a number of
problems         with      the mining            law and its           administration,                     we believe
that      the    provisions         of H.R.             3866 address               the    intent          of the      actions
we have recommended                 and would             well      serve          the    nation's          natural
resource         policy       interests.

          Mr.    Chairman,         this         concludes          my statement.                   We would         be
pleased         to respond         to any questions                   you or members of the
Subcommittee              may have.

ATTACHMENT I                                                  ATTACHMENT I

                           MINING ON FEDERAL LANDS

1.   Public  Lands:  Interior  Should Ensure     Asainst  Abuses    From
     Hardrock Mininq   (GAO/RCED-86-48, Mar.     27, 1986).
2.   Federal  Land Manaqement:  Nonfederal      Land and Mineral
     Riqhts Could Impact Future Wilderness       Areas (GAO/RCED-87-
     131, June 30, 1987).
3.   Federal   Land Manaqement:   Financial  Guarantees Encouraqe
     Reclamation   of National  Forest System Lands (GAO/RCED-87-157,
     Aug. 24, 1987).
4.   Federal  Land Manasement:   Limited   Action Taken to Reclaim
     Hardrock Mine Sites   (GAO/RCED-88-21,     Oct. 21, 1987).
5.   Federal Land Manaoement:        An Assessment of Hardrock     Mininq
     Damase (GAO/RCED-88-123BR,       Apr. 19, 1988).
6.   Importance    of Financial Guarantees   for Ensurins    Reclamation    of
     Federal    Lands (GAO/T-RCED-89-13,   Mar. 7, 1989).
7.   Federal     Land Manasement:    The Minins Law of   1872 Needs
     Revision     (GAO/RCED-89-72,   Mar. 10, 1989).
8.   Federal  Land Manasement:    Unauthorized   Activities Occurrinq       on
     Hardrock Minins Claims    (GAO/RCED-90-111,   Aug. 17, 1990).