Gold Mining and American Law

Gold has been mined by cultures throughout the world for many thousands of years. Closer to modern times, that extraordinarily attractive precious metal was the primary motive for the discovery, exploration, and subjugation of the New World by European nations desperate for economic and political power. But to bring us up to modern times, much of the gold remaining in the Earth today is in microscopic quantities and is being torn from rock at enormous environmental and social costs, often in some of the most isolated and least developed parts of the world.

Naturally, all types of mining are fraught with many kinds of hazards and risks, including economic, social, environmental, and safety. In the past century, a great deal of those challenges have been recognized and dealt with responsibly both by governments and mining companies. However, one of the notable exceptions to that generalization is modern day gold mining, both in the U.S. and in many other parts of the globe. Here in the U.S. the mining of precious metals (including gold) has been critically affected by one particular federal law that was adopted in the age of America’s expanding frontier, the General Mining Law of 1872 (hereinafter referred to as GML). That law has basically been unchanged since it was passed and is in force today as one of the major statutes that direct the use and management of over 270 million acres of federal lands. Those lands constitute almost one-fourth of all the land in the United States and two thirds of the lands the federal government holds in trust for all Americans.

Almost across the board, mining companies regard the GML with near universal glee and a state approaching euphoria. To coin a phrase, they absolutely love it. And why wouldn’t they? The Law encourages mining by permitting free access to individuals and corporations to prospect for minerals in public domain lands and to extract them without paying one cent in royalties. That specific GML provision is totally unlike other federal mining laws that regulate the extraction of coal, oil, or natural gas on public lands.

The GML not only gives away public minerals but as part of that process also sells public land for mining purposes for between $2.50 to $5 an acre, land costs that were current in 1872. Not surprisingly, owing to the express absence of environmental regulations in the GML, when mining companies go belly up, they frequently leave unsuspecting taxpayers to pay the tab for the millions of dollars that are required to clean up horrific environmental messes left behind.

Real World Example: The Zortman-Landusky Gold Mine, which was owned and operated by Pegasus Gold Corp., is located in the Little Rocky Mountains of north-central Montana at the edge of the Fort Belknap Indian Reservation. In the past decade that mine has become a glaring example of the GML’s regulatory inadequacies, demonstrating how both state and federal mining laws failed to protect the environment and local communities from the actions of careless and indifferent mining companies. By 1982, irresponsible management of cyanide solutions at the Zortman-Landusky Mine resulted in between six and twelve separate spills and leaks of cyanide contaminated groundwater and poisoned local drinking water sources. In 1996, a legal settlement was reached through a lawsuit filed against Pegasus Gold for $37 million to upgrade and expand the water-treatment facilities following one of the worst water quality violations in the State of Montana, including $2 million in civil penalties from the State and federal governments for illegal discharge of mine wastewaters. An additional $1.8 million was set aside to evaluate and monitor the potential human health effects. But in 1998, after granting key executives bonuses of $5 million each and selling off other financial assets, Pegasus Gold filed for bankruptcy, leaving Montana taxpayers with approximately $56 million in long-term land reclamation costs (of which $30 million will be paid by Pegasus). But that figure does not cover the long-term costs of water treatment that will be required for many, many decades since water pollution generated by sulfuric acid leachates produced by the mining operations are so extensive that water treatment systems will have to be operated far into the future to assure the safety of local drinking water, at a cost of hundreds of millions of dollars.

In 1872 the reasons for the passage of the GML were to promote mineral exploration and development on federal lands in the western United States, offer opportunities to obtain clear title to mines then being worked, and help settle the West. Well, guess what. The West has been settled for many decades, clear titles were obtained long ago, and mineral exploration and development on federal lands in the western United States have been going gang-busters ever since. So, why is the GML still in force? Despite the environmental focus of the author of this blog, the answers are not as easy as many environmentalists would have people believe. Of course, politics are involved but so are the inherent difficulties of extracting low concentrates of metallic ores from very large quantities of source rock.

Mining companies and their executives pour millions of dollars of legal campaign contributions into the pockets of eager federal Senators and Representatives, who then become blind, deaf, and totally dumb to serious environmental or social mining issues that are raised by the public. And what about the welfare of the American people or the health of the environment? Those vague considerations get kicked out the window when money and power are at stake, especially in Washington, DC, that haven for corrupt and venal politicians. Mark Twain hit the nail on the head when he said, “America is a nation without a distinct criminal class . . . with the possible exception of Congress.” That situation has not changed appreciably since Samuel Clemens went to his reward.

The question arises as to why Congress would continue to release national wealth to individuals and corporations by supposedly under-pricing minerals on federal lands (actually giving them away by charging truly minimal costs). One answer is that the people who make the decisions on selling federal land (Congressmen) do not themselves own the property rights in the land or in minerals under the surface. Therefore, the wealth that is given up through under-pricing would not have accrued to them in the first place. But Congress can and does give the right to mine under-priced minerals to their friends and associates, meaning to those who have powerful interests in donating millions of dollars to political campaigns, and here you better be thinking mining companies and their executives.

Consequently, the flow of political donations from mining companies into the coffers of political re-election campaigns continues unabated and is perfectly legal if not possessed with the stink of legitimized corruption. And those amenable politicians bend over backwards to protect their friends and associates by fending off proposals from environmentalists to modify the GML by screaming at the tops of their lungs about all the jobs and taxes they are producing in their respective states. Somehow the subject of persistent, horrifically expensive adverse consequences and taxpayer-borne costs of that mining never comes up. There's a shock.

However, rhetoric and emotion aside, another reason for the GML may reflect the inherent uncertainties that have always characterized hard rock mining. Prospecting for gold, silver, copper, or a variety of other metallic ores is not the fairly precise science that characterizes oil well drilling or even coal mining. Predicting the yield of a metallic mineral deposit disseminated throughout a large volume of economically worthless host rock is fraught with difficulties since the ore concentration may not be as rich as was first estimated and the extensive initial investment in mining operations may never be recouped. And even if it is, the resultant profit stream is typically low when compared with the profits earned by oil, natural gas, or coal companies. Actually, about half of all hard rock mines are unproductive and unprofitable. As a result, many mining firms have less capital reserves with which to pay for complex environmental clean-up after the ore has been extracted.

The question that should be asked is whether it is better for mining companies to despoil the American environment in order to extract whatever precious metal they are seeking and then in many, if not most instances, leave the horrifically expensive clean-up bills for the taxpayers rather than go to other countries and do their dirty work there? What has happened in the U.S. is that natural resource companies have spent their money where they know it will do the most good: by investing in political election campaign donations and huge lobbyist fees so that most meaningful clean-up provisions are removed from environmental legislation well before they are passed into law. Don’t forget, weak environmental regulations directly translate into profits and more campaign contributions flowing to the politicians. But that issue is one for the American public to decide. Does the average Joe and Jane Six-Pack care if mountains in West Virginia are being blasted into pieces that are then dumped into adjacent streams until those valleys are buried under as much as two hundred feet of waste? Or that the precious fossil water resources in Arizona and Nevada are being used to process gold ore can never be returned to aquifers for more productive human uses? Serious questions, but just don’t ask employees of natural resource firms in those states for answers or you may wind up with a black eye and a fat lip or in a hospital bed. And that's no joke.

Author’s Note: Interpretations of mining laws and regulations are naturally colored by a person’s overall political philosophy, especially in terms of how government is defined, the roles government should play, the nature of property rights, whether environmental ethics actually exist, whether government has a stewardship responsibility for land-environment, whether sustainability is possible or should be attempted, etc. Those political foundations are far reaching with respect to informing individual understanding of such things as land management and development, conservation, pollution, etc., and are too complex to be addressed in this blog post.

Readers interested in mining sources that are relatively objective and dispassionate should consult the following:

• Congressional Research Service, Report IB89130: “Mining on Federal Lands,” May 3, 2001, online source: http://ncseonline.org/NLE/CRSreports/Mining/mine-1.cfm?&CFID=8492224&CFTOKEN=29386060
• National Research Council (Committee on Hardrock Mining on Federal Lands, Committee on Earth Resources, Board on Geosciences and Resources, Commission on Geosciences, Environment, and Resources), Hardrock Mining on Federal Lands, National Academy Press, Washington, D.C., 1999, online source: http://books.nap.edu/html/hardrock_fed_lands/;
• John Dragonetti, “The General Mining Law of 1872 Perpetually Revisited — But Still Intact,” The Professional Geologist; March 2000; online source: http://www.agiweb.org/gap/legis106/tpg_mining.html

Readers with conservative points of view should see the following materials:

• Richard Gordon and Peter VanDoren, “Two Cheers For The 1872 Mining Law,” Cato Policy Analysis No. 300; April 9, 1998; online source: http://www.cato.org/pubs/pas/pa-300.html
• Testimony of Richard L. Gordon, Adjunct Scholar, Cato Institute, Emeritus Professor of Mineral Economics, The Pennsylvania State University, before the Subcommittee on Energy and Mineral Resources, Committee on Resources, U.S. House of Representatives: Reforming the 1872 Mining Law; August 3, 1999, online source: http://www.cato.org/testimony/ct-rg080399.html
• Andrew P. Morriss, Roger E. Meiners, and Andrew Dorchak, “Homesteading Rock: A Defense of Free Access under the General Mining Law of 1872.” Case Research Paper Series in Legal Studies, Working Paper 04-2; April, 2004. Available online at: Social Science Research Network http://papers.ssrn.com/sol3/papers.cfm?abstract_id=530124

Readers with liberal-environmental points of view may want to consult the following materials:

• Sierra Club, http://www.sierraclub.org/wildlands/monuments/threats.asp
• Westerners for Responsible Mining, http://www.bettermines.org/cmc_1872.cfm
• National Resources Defense Council http://www.nrdc.org/legislation/record/chap3.asp
• http://www.earthworksaction.org/1872.cfm also https://www.earthworksaction.org/pubs/MPCfs_1872onePager.pdf

Readers of all political stripes interested in finding out the straight scoop on the country’s leading toxic polluters—based on pollution levels reported by the industry itself—should consult the Toxics Release Inventory (TRI) Program that was established in 1986 by the Emergency Planning and Community Right-to-Know Act (EPCRA) and administered by the Environmental Protection Agency (EPA). TRI requires industrial facilities to disclose to the public annually the amount of pollutants they have discharged into the air, water, and land or transferred to other sites for incineration, recycling, and disposal. All interested readers have to do to find out the real situation is to go to EPA’s Toxics Release Inventory (TRI) Program web site (http://www.epa.gov/tri/) and check the data for themselves. It should come as no surprise to find that hardrock mining companies are way out in front of the pack, a dubious distinction at best.

During its last days in office, the Clinton administration and Secretary of the Interior Bruce Babbitt changed mining regulations contained in 43 CFR 3809 Surface Management Rules for Hardrock Mines on BLM-Administered Lands. After George W. Bush was sworn in as President, those rules were immediately challenged in court by two industry plaintiffs, the State of Nevada, and several environmental public interest organizations. In early 2001, then Secretary of the Interior Gale Norton suspended the 3809 regulations and reopened the rulemaking process. The Bush administration published final 3809 rules on Oct. 30, 2001, which can be found at 66 Fed. Reg. 54834 (hereinafter called “the Norton 3809 regulations”).

The Norton 3809 regulations retain many of the elements of the Babbitt 3809 regulations and reinstate a few elements of the original 3809 rules enacted in 1980. The Norton regulations also retain the acid rock drainage and cyanide leaching performance standards set in the Babbitt 3809 rules. Nearly everyone involved in the 3809 rulemaking dialogue agreed that BLM should require a reclamation bond for all mining activities that disturb the surface, especially since the need to expand reclamation bonding requirements was a key finding in the NRC Report cited above. The final Norton 3809 regulations require a reclamation bond that covers one hundred percent of the anticipated costs of reclamation for all surface-disturbing activities that are greater than casual use. The new 3809 rules also eliminate the possible use of corporate guarantees as an acceptable form of financial assurance.

Proponents claim that the final 3809 rules strengthen environmental regulations for hardrock mining, thereby addressing many of the environmental issues raised in past legislative debates about amending the GML. Naturally, the view of opponents is that significant progress to ensuring that mining companies meet environmental standards is yet to be achieved. However, no matter what your viewpoint, significant progress has been made towards achieving President Clinton’s goal of amending the GML through the 3809 rulemaking process. That said, three critical GML policy issues remain to be resolved: 1) whether patenting should be abolished, modified, or preserved; 2) whether payment of federal royalties based on the value of minerals extracted should be required; and 3) whether a fund to clean up abandoned mines should be established.

Substantive changes to the General Mining Law of 1872 were proposed in two separate but similar bills, the Hardrock Mining and Reclamation Bills of 2007 and 2009. In both cases, those bills suffered slow, painful deaths in Congress. In the poisoned political atmosphere of 2012 (when this post was written) the chances of getting similar legislation passed seem as likely as Sarah Palin having a sex change operation and then turning into a flaming liberal who supports LGBT rights. In other words, don’t hold your breath.