Is This a Bad Deal for Taxpayers?

Under current law, a mining company may demand payment for protecting publicly owned natural resources--at your expense

10-01-1997 // Roger Di Silvestro

The story begins on Henderson Mountain, which rises more than 10,000 feet above southern Montana, hard against the Wyoming border. To the north and east of the mountain lies the Absaroka-Beartooth Wilderness Area, Montana´s most popular outdoor area. To the south, and climbing the mountain´s slopes, is Gallatin National Forest. To the southwest, less than three miles away, is Yellowstone National Park. And directly under Henderson Mountain lies the gold--perhaps a billion dollars´ worth, according to estimates of the company that wants to rip the top off the mountain and mine the gold. And there, in this otherwise idyllic place, lies the rub.

For if the mine goes in, the rest of the wilderness values will face certain jeopardy. Extracting gold from the mountain will produce millions of tons of waste that, when in contact with water and air, will generate sulfuric acid. The mining company--Crown Butte Mining, a subsidiary of a Canadian firm called Noranda, Inc.--proposes to keep 5.5 million tons of the waste at the site, atop Henderson Mountain. The wastes will be permanently submerged in a specially built reservoir with a surface area the size of 67 football fields.

As proposed, the reservoir will require the construction of a 90-foot-tall dam. Depending upon which of three Henderson Mountain streams the reservoir is built, escaping toxic wastes could flow down Soda Butte Creek into Yellowstone National Park, or down Daisy Creek into the Absaroka-Beartooth Wilderness Area, or into the blue-ribbon trout waters of the Clark Fork, Wyoming´s only federally designated wild and scenic river. All three streams ultimately are tributaries of the Yellowstone River, a 671-mile waterway unfettered by dams. It is the longest free-flowing river in the lower 48 states.

Crown Butte officials say that the reservoir will be designed to last forever, come ava- lanche or earthquake, so the acid-generating wastes will be kept eternally safe. "That claim would be easier to believe," says Cathy Carlson, a National Wild life Federation public-lands specialist, "if Noranda Minerals, one of the corporate parents of Crown Butte Mining, had not been cited by the state of Montana as recently as 1992 for violating clean-water standards for 18 months during exploration for a huge copper and silver mine." And three years ago, nine conservation groups successfully sued Noranda for failing to acquire proper toxic-discharge permits for historic mines on their property.

With such risks and such important natural resources at stake, the proposed mine site (which Crown Butte dubbed the New World Mine) could not help but achieve notoriety. It has drawn the attention of a variety of conservation groups that want the mine stopped, and has even generated a visit by President Bill Clinton.

The president showed up at the site last fall in the wake of months of controversy over the mine. He announced that his administration had struck a deal with Noranda that would save Yellowstone National Park, the Absaroka Wilderness area, the wild and scenic river, the blue-ribbon trout stream--the whole kit and kaboodle--from the threat of mining.

"The deal went like this," says Carlson. "Noranda will relinguish its mineral rights at Henderson Mountain, turning them over to the U.S. Forest Service, in exchange for $65 million in federal assets."

In essence, observes Carlson, Noranda is holding Henderson Mountain hostage, telling the U.S. government that the company will risk despoiling the area unless the government pays up. Officials of the Clinton administration, on the other hand, maintain that the deal merely protects Noranda´s private-property rights. "The problem," says Carlson, "is that the Clinton administration is handing the mining industry a lever that they can use to pry the lid off of federal coffers. Any mining company could demand payment for protecting the public´s natural resourses--at taxpayers´ expense."

And therein lies the rest of the story.

Mining in the United States has been a sweet deal for a long time--since 1872, to be exact. That was the year that Congress passed and President Ulysses S. Grant signed the U.S. Mining Act. The law gave miners a cushy arrangement because the government wanted to encourage settlers to go into the remote West and build towns and cities, and gold was as good an incentive as any for getting people to make the move. The law set the price for staking a mining claim at $2.50 to $5 an acre, depending upon the type of claim. Once a claim was made, or patented, mining took priority over all other uses of the land. Moreover, the miner could resell the land for any price it would bring.

Initially the law applied to anything a min- er might extract from the ground, but now it covers only hard-rock minerals such as gold and silver. In addition, miners must pay a $100 annual fee to the federal goverment. Except for these changes, the rules mandated by the law have not changed.

Today, U.S. mining claims may be the only things in the world still selling at 1872 prices. At least, that is, when the government sells the rights on behalf of taxpayers. "After that, the sky´s the limit," says Carlson. For example, the total cost for patenting the New World Mine is about $225, but Crown Butte Mining could resell the claim for millions of dollars--as it seems to be doing to the government. Crown Butte Mining can get away with this because of the 1872 law, which requires the government to grant a patent to a miner who demonstrates his or her claim is capable of production.

Two years ago, Congress passed a temporary moratorium on issuing new mining patents under the law. (The moratorium is subject to annual review; it was renewed in 1996.) But thousands of claims for such patents remain on the books. For these, even if a proposed mining project brings serious environmental risks, the government says it cannot turn the project down if the claim is legally valid. Federal authorities can take action against a mine only after the damage is done.

This situation remains ripe for exploitation," says Pete Frost, an NWF attorney in Oregon. "Once a mining company has obtained a patent on valuable wilderness areas, national forests or other public lands, all it has to do is threaten to dig." The only way the government can stop the mining is to buy out the claim at taxpayers´ expense. So a claim purchased for only a few dollars, adds Frost, "can be turned into millions without the miner even having to take on the risks of actual mining. They just have to hold public lands hostage."

Keith Knoblock, vice president of the National Mining Association, a trade group in Washington, D.C., takes a different view of the situation. In the case of the New World Mine, he says, the Canadian mining company has already invested millions of dollars in the project and should be reimbursed if prevented from completing its plans. "If you have a property right taken away from you," says Knoblock, "then you deserve compensation."

However, conservationists and Mining Act reformers fear that the president´s approach at New World Mine will set a bad precedent. "Part of the miners´ strategy is to give every appearance that they´re going to go ahead and mine," says Barbara Ullian, conservation director of the Siskiyou Regional Education Project, a grassroots environmental group in Oregon. This, she says, makes proving that a miner is using a claim to extort funds difficult. But some examples suggest how the administration´s approach to saving the New World Mine--which may in fact be the best approach possible under current mining law--could backfire at other claims:

  • In the Kalmiopsis Wilderness Area in southwestern Oregon, a miner has laid claim to almost 2,200 acres on the National Wild and Scenic Chetco River. He actually made his initial claim in the 1960s before the wilderness area was established, but he did not seek a patent until the 1990s. The patent would cover 160 acres, which he plans to use for a five-year mining operation that would dig out 31 acres to a depth of 40 feet. Another 7.8 acres will serve for waste processing and other work. He also would put a 10,000-gallon diesel fuel storage tank at the site and two 500-gallon tanks for oil and gasoline. Trucks and other equipment would work the mine for 16 hours daily. However, the owner is considering selling his claim to the site if environmental groups offer enough money.

  • Because of the 1995 moratorium imposed by Congress, the Independence Mining Company in Colorado is unable to patent public lands that it wants to add to a large gold-mining claim it already holds. But the company found a solution, says Aimee Boulanger, Southwest circuit rider for the Mineral Policy Center, a Washington, D.C., nonprofit group. The mining company bought four parcels of land located on private inholdings on public lands administered by the Bureau of Land Management (BLM). The company offered these parcels to BLM in exchange for public lands near the company´s mine site. Although this exchange will privatize these lands and allow the company to bring mining to the edge of Victor, Colorado--a plan residents oppose--BLM agreed to the swap.

  • Also in Oregon´s Kalmiopsis Wilderness, another miner in 1988 patented 60 acres along a stream that is important habitat for dwindling coho salmon and steelhead trout. He paid $150 for the patent, and six years later offered it back to taxpayers for $850,000. When the Forest Service turned down that offer, he demanded unlimited motorized access through the wilderness area for a resort he proposes to build on his mining claim.

  • Not long ago, mining giant ASARCO recently obtained a list of Arizona lands the Forest Service most wanted and spent $5 million buying up 2,200 acres of those lands. Then it offered to trade the 2,200 acres for 13,000 acres in the Coronado National Forest. The national forest lands surround 2,000 acres that ASARCO already has patented. The company says it may never mine the land. So why does it want it? Boulanger speculates that ASARCO either wants to bypass federal regulations for mining on public land or perhaps has other plans. The forest land lies south of Tucson. In time, the 13,000 acres might make a profitable suburb if not held as public land, says Boulanger.

If the government goes along with such offers from mining companies for buyouts and land exchanges, the precedent will be of immense proportions. Mining claims cover millions of acres of U.S. public lands and each represents a potential buyout or tradeoff. "The scope of the situation is unimaginable," says Carlson. "And the real solution to the problem is not buyouts, but reform of the 1872 mining law."

Specifically, says Carlson, Congress needs to eliminate the sale of patents of public lands to mining companies. In addition, Congress should require mining companies to pay to the federal government a royalty on extracted minerals. In part, this money would help with cleanup of polluted mine sites. The government, she adds, also must establish environmental standards to stop pollution from ongoing mining operations.

Pollution is a major and costly mining problem. According to the federal General Accounting Office, more than 424,000 acres of mining sites that have never been cleaned up will require billions of taxpayer dollars to correct environmental damages and the hazards they represent. The biggest site on the federal Superfund list, which ranks the nation´s most polluted sites, is a shut-down complex of mines stretching for 100 miles along the Clark Fork of the Columbia River in Montana.

Royalties from today´s mines could help pay for cleanup. Between 1873 and 1988, according to The Wilderness Society´s resource planning and economics department, miners removed $363 billion worth of gold, silver and copper from public lands. If miners had been required to pay a 12.5 percent royalty on those minerals, as petroleum companies do on oil, the three metals alone would have added more than $40 billion to the public treasury (in 1988 dollars).

The Clinton administration has sought to change the law. Just this year, the president proposed in his 1998 budget request a 5 percent royalty fee on minerals from public lands. Secretary of the Interior Bruce Babbit, however, acknowledged not long ago that the administration´s proposal does not go far enough. But he maintains only Congress can overhaul the law thoroughly. "We are giving away public assets for free to mining corporations from Canada, Belgium and New Zealand," he told The Washington Post. "If we tell social-services recipients to take a cut, and then exempt this kind of corporate welfare from the solution--it´s not just bad policy, it´s morally indefensible." So far, mining reforms passed by wide margins in the House of Representatives have stalled in the Senate.

In addition to all the other woes of the Mining Act, notes Pete Frost, "We now have this new wrinkle of mining companies threatening to degrade valuable wildlands unless they are paid off by the federal government." Mining companies can get away with these threats because of the law´s retroactive nature: The government cannot do anything about environmental degradation until after it occurs.

"The 1872 Mining Act has allowed mining developers to take advantage of taxpayers," says Carlson. "Now, the threat of buyouts has been added to the litany of legal loopholes. Isn´t it time for some changes?"

A former senior editor of this magazine, Roger Di Silvestro is now features editor at BioScience in Washington, D.C.


Mining Law Reform: Join NWF´s Campaign
Want to help NWF in its nationwide campaign to reform the Mining Law? Let your Members of Congress know that you, as a taxpayer, no longer support public-land giveaways and buyouts for mining corporations. Write: [your Representative´s name], U.S. House of Representatives, Washington, D.C. 20515; or [your Senator], U.S. Senate, Washington, DC 20510. If you do contact Members of Congress, let NWF know; or if you would like more information on reforming the Mining Law, write: Cathy Carlson, NWF, 2260 Baseline Road, Boulder, Colorado 80302.

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