Myths and Facts about Mining Reform

Gold King 7th Level Adit (Photo Provided by Fox 6 News)
Gold King 7th Level Adit
Gold King 7th Level Adit

The recent release of toxic water from the Gold King mine near Silverton, Colorado has resulted in renewed efforts to pass mining reform legislation.  Like past legislative packages dealing with reform of the 1872 Mining Law, the current bill before Congress (H. R. 963 – Hardrock Mining Reform and Reclamation Act of 2015) does not provide the incentives necessary for the responsible development and operation of the mines required to meet the needs of present and future generations of Americans.

In attempting to gain public support for this legislation, proponents of mining reform have been spreading false and misleading information about current laws governing mining activities and proposed mining reform.  This article exposes some of those myths.

Myth:  The 1872 Mining Law is antiquated and has not been changed in 143 years.

Fact:  The U. S. Constitution is much older, being ratified in 1788.  It has also been updated over the years through the passage of 27 Amendments.

Like the U. S. Constitution, the 1872 Mining Law has also been updated numerous times since its inception.  Major revisions have been made in 1920, 1955, 1976 and again in 1993-1994.  These changes have been significant in that regulatory authority of federal land management has been increased as have fees paid to the government to explore and develop mineral resources on public lands.

Myth:  The 1872 Mining Law was signed into law by President Ulysses S. Grant, to encourage western migration and settlement of publicly owned lands in the west.  A relic of a bygone era, the 1872 Mining Law has long since outlived its purpose.

Fact:  The Homestead Act of 1862 was designed to encourage western migration and settlement of public lands in the west.  The 1872 Mining Law was designed to provide an incentive to explore and develop the mineral resources required by a growing nation.  It provides the same incentives today as it did in 1872.

Before making substantial investments, claim holders must know that their rights to evaluate and occupy public lands are secure.  The 1872 Mining Law ensures that if a discovery is made, the claim holder will be permitted to develop and mine this resource in accordance with a strict set of guidelines that are designed to minimize environmental damage to the land. Otherwise, the risks are simply too great to attract the investment capital required to find and develop the natural resources necessary to fulfill the needs of present and future generations of Americans.

Myth:  Royalty provisions in the Hardrock Mining Reform and Reclamation Act of 2015 are fair and equitable.

Fact:  The proposed 8 percent royalty on gross income significantly exceeds royalties that have been historically paid by the metals mining industry, which depending on commodity generally range from 2 to 3 percent of net smelter returns (NSR) or 5 to 15 percent of net profits (NPI).

R. 963 is based on the flawed assumption that it will maximize the taxpayer’s return on investment. However, it ignores the basic economic law of supply and demand; the price of locatable minerals is determined by the world market. Domestic producers have no control over these commodity prices.  The proposed 8 percent gross income royalty will significantly impair the U. S. mining industry’s ability to remain competitive in the global marketplace.  Maximizing short-term gains with the higher gross income royalty significantly increases the probability a mining project will become unprofitable and makes it particularly vulnerable during periods of low commodities prices.  If you remove the mining industry’s incentive to produce locatable minerals at our domestic mines, they will close these facilities.

If the federal government is interested in maximizing the taxpayer’s return on investment, it needs to establish a royalty structure that maximizes returns over the entire life of a mining project.  This requires a lower rate, which will enable a mining operation to remain profitable during periods of low commodity prices.  Both the NSR or NPI royalty structures optimize the use of our natural resources, allowing both business and government to maximize the benefits received from mining locatable minerals on our public lands.

Myth:  The 1872 Mining Law allows valuable mineral-bearing public lands to be sold for $2.50 to $5.00 per acre.

Fact:  Although the 1872 Mining Law continues to allow claim holders to acquire title to unpatented mining claims that can be shown to contain a valid mineral discovery, there has been a moratorium on the issuance of patents since October 1, 1994.  To date, this moratorium has been temporary, being annually renewed through various Department of Interior appropriations bills.  Since October 1994, the only way to transfer title of unpatented claims has been through a land exchange (i.e. Oak Flat Exchange).

Myth:  The 1872 Mining Law does not contain provisions to protect the environment.

Fact:  The U. S. mining industry operates under the highest level of environmental regulation in the world, which include the National Environmental Policy Act, Clean Air Act, Clean Water Act, Safe Drinking Water Act, Solid Waste Disposal Act, National Historic Preservation Act, Federal Land Policy and Management Act, Endangered Species Act, Toxic Substances Control Act, Resource Conservation and Recovery Act, and Comprehensive Environmental Response Compensation and Liability Act, as well as numerous other federal, state and local regulations.

Myth:  A provision for an abandoned mine reclamation fund within proposed mining reform legislation will provide the revenues required to reclaim abandoned hardrock mines throughout the west.

Fact:  This provision assumes the proposed mining reform legislation will have no adverse impact on the domestic mining industry.  However, many other provisions contained within this bill will significantly increase the costs and risks for exploration and development of new mining projects as well as the operation of existing mines.  It will likely result in the closure of many the mining projects throughout the west.  Closed mines or mines that are never developed will generate no revenues for an abandoned mine reclamation fund.

Mining reform is a very complex issue involving our economy, national security, royalties, the use of public lands and the environment.  Like previous attempts to reform U. S. mining laws, priorities set forth in H. R. 963 are so focused on dealing with environmental and social issues related to mining locatable minerals on public lands, it fails to consider any of the significant and widespread negative impacts that would result from provisions contained within this legislative package.

The possibility of this legislation accomplishing its stated goals is nil, because its provisions will make it too costly for domestic mining operations to remain competitive on the world market.  With reduced domestic exploration efforts and fewer operating mines, the total revenues remitted to local, state and federal governments from these sources will be only a fraction of what they are today.  This heavy-handed approach will increase the risks and costs of doing business to unacceptable levels, resulting in the suspension of exploration activities and development of new mining projects as well as the pre-mature closure of many existing operations.  Furthermore, it will be unable to resolve environmental issues at former operations, because without a healthy domestic mining industry there will be no funds to pay for this reclamation.

If enacted, H. R. 963 will increase our nation’s dependence on imported goods sending badly needed dollars abroad that could otherwise be invested in our economic future.  It will likely end up costing taxpayers billions in lost tax revenues and associated social costs resulting from the loss of jobs in the mining industry and other businesses that provide goods and services to our nation’s mines.  The costs resulting from a weakened national security are incalculable.

Disclaimer:  David Briggs is a resident of Pima county and a geologist, who has worked in the mining industry for more than 35 years.

Copyright © (2015) by David F. Briggs.  Reprint is permitted provided the credit of authorship is provided and linked back to the source.

About David F. Briggs 47 Articles
David F. Briggs is a retired geologist, whose work is feature by the Arizona Geological Survey. Briggs intermittently worked on the Rosemont project between 2006 and 2014. He has authored articles on Arizona’s mining history.