In the dark

The U.S. government has no way of tracking the precious minerals that are taken from federally managed lands by the mining industry, according to the Government Accountability Office.

Because the industry does not have to pay royalties on what it mines, this lack of tracking means neither the government or the public knows how much the companies are making and how much the public is losing because of the lack of royalties.

The GAO mining probe was requested by U.S. Rep. Raul Grijalva and U.S. Sen. Tom Udall.

Critics of federal mining policy said the GAO report will spur a renewed effort to change the Mining Law of 1872, which has been a cause célèbre for years. The GAO’s best estimate of value taken from public lands by mining was $6.4 billion in 2011, meaning $800 million in lost royalties.

“This report confirms what we’ve been saying all along—that we need to reform the mining law of 1872,” Udall said. “Hardrock minerals are natural resources that belong to the American people, and we need to make sure we are getting the best return on what should be an investment—not a giveaway.”

“We’ve been hearing from conservatives that we need fewer hours at national parks, less reclamation of valuable lands, fewer services for park visitors and a whole gamut of supposedly necessary cutbacks,” Grijalva said. “Well, now we know we’ve been leaving a huge pot of money on the table that could change all that. There’s no reason to keep these extraction and royalty laws out of date. At the very least, we need disclosure so American taxpayers know what is being taken from their lands. Keeping the public and Congress in the dark any longer about what’s going on with federal property doesn’t serve any public purpose, and it should end.”

Grijalva is the highest ranking Democratic member of the House National Parks, Forests and Public Lands Subcommittee. Both Udall and Grijalva come from Western mining states, an indication of how much has changed in the west over the decades.

But that is not the case in the Silver State. Both of Nevada’s U.S. senators and U.S. Rep. Mark Amodei, who represents the northern Nevada House district, are opposed to changes in the 1872 law.

Amodei was not available for comment, but his spokesperson Brian Baluta said, “People like Rep. Ed Markey from Massachusetts, which has neither federal lands nor a mining industry, view mining as little more than a potential cash cow for the federal government. But in Nevada, mining is our livelihood. It’s high-paying jobs and our tax base. It’s the one part of the economy that is booming rather than struggling. But it is a capital-intensive and time-intensive enterprise and if you make it even more cost-prohibitive than it already is by altering the existing mining law, then the industry will go elsewhere—to Canada, Australia and China.

“In addition to killing jobs, a proposed dirt tax would also harm the economy by increasing costs for users and consumers of mined products—i.e. everyone in the United States. Such a royalty would be one of the highest of any country in the world and would eliminate the majority of the industry’s profit from long-term mining investments and detrimentally impact investments in new mines.”

Reid, elected as a critic of mining in 1986, made his peace with the industry after winning election and has prevented any changes in the 140-year-old law getting through the Senate, though he eventually began using buzzwords about “reform” and developing “modern” mining law. Reid actually holds mining claims in his childhood hometown of Searchlight and the firms of his sons have had mining clients.

In a cover letter to the report, the GAO’s Anne-Marie Fennell wrote that oil, gas and coal on federally managed land are known as leasable minerals and are subject to “payments in the form of rents and bonuses, which are required to secure and maintain a lease, and royalties, which are based on the value of the minerals that are extracted. These minerals are generally known as leasable minerals. …

“In contrast, other minerals, such as gold, silver, and copper, are governed by the General Mining Act of 1872, which makes these minerals available to operators through a federal claim-patent system that provides the right to explore, extract, and develop the federal mineral deposit without having to pay a royalty. These minerals are generally known as hardrock minerals.”

The Sierra Club issued a statement on the GAO’s findings:

“This report provides an answer to anyone wondering why big polluters are so eager to get their hands on our public lands: big oil and mining companies get bargain basement deals to destroy the mountains, valleys, and rivers owned by everyone else while raking in billions in profits. These big companies are the worst possible tenants American taxpayers could have, devastating the property they have been trusted with by sacrificing our lands and poisoning our water—and then getting rewarded for it.”

The CATO Institute defends the 1872 law:

“Critics of the current law use an egregiously inaccurate methodology to conclude that the ‘economic giveaway’ is quite large. What critics call abuses are simply efficient economic responses to bad laws. The environmental impacts of mining, moreover, are dramatically overstated. Opponents of reform are unfortunately content to accept public ownership of the mineral estate, a regime that inevitably politicizes economic decisionmaking and introduces all of the complications inherent in socialized enterprises.

“Defenders of the current regime also argue that valuable mineral deposits are unique and rare. Thus, they believe that a law prohibiting alternative uses of mining land is the best policy. That argument, in turn, has two important implicit premises, one of which is valid and vital, and the other of which is wrong. The valid premise is that the government must adopt simple rules because it cannot handle complexities. The invalid proposition is that government should, nevertheless, control private decisions about how land is used.”

Former U.S. Sen. Dale Bumpers, a frequent Reid opponent in efforts to change the 1872 law, has called it “a license to steal.” Bumpers wrote in 1998:

“Here’s how the law works: Anyone, and I mean anyone, can drive four stakes into the ground on federally owned lands in the West, delineate the four corners of a 20-acre tract, and file a hardrock-mining claim on that 20 acres. There’s no limit on how many claims one may own, and the claim will remain in effect as long as the owner pays $100 a year per claim. What’s more, whereas oil, gas, and coal companies must pay substantial royalties to taxpayers for the right to extract those resources from public land, the hardrock-mining companies pay nothing for extraction rights on their claims—not a dime.”

The General Mining Law of 1872 was sponsored by U.S. Sen. William Stewart of Nevada, a mining man who was not overly disturbed by the niceties of conflicts of interest, at a time when state officials back in Nevada were battling Stewart’s industry colleagues.