Capitol Hill's longest-running outrage: Congress winks while the mining companies shaft the taxpayers.

Congress winks while the mining companies shaft the taxpayers

Joining the Senate in 1975 was a traumatic experience for me. I had been governor of Arkansas for four years and I was accustomed to making policy, giving my approval to legislation that I thought had merit, vetoing legislation that didn't, and, in general, making things happen with stroke of a pen. But the Senate is an altogether different place, and for those without yards of patience, an often maddening one. It is virtually impossible to accomplish anything significant without spending years shepherding, pleading, cajoling, begging, explaining, and compromising with your colleagues. And all that effort does not even guarantee a favorable result, or a result that hasn't been watered down until it's hardly recognizable.

I've learned this lesson the hard way. This is the ninth agonizing year of my effort to reform the Mining Law of 1872, signed by Ulysses S. Grant and intended to entice people to "go West" and settle. My successes have been marginal. Because I will leave the Senate at the end of the year, the conclusion of my fourth term, I have redoubled my efforts. But unless the American people are somehow awakened to this little-known abuse, I have no reason to be optimistic.

This archaic, 125-year-old law permits mining companies to gouge billions of dollars worth of gold, silver, platinum, palladium, and other hardrock minerals from public lands, without paying one red cent to the real owners, the American people. And these same companies often leave the unsuspecting taxpayers with the bill for the billions of dollars required to clean up the environmental mess left behind. The Mining Law is as much a relic of bygone frontier days as the sod hut and the covered wagon. The era of the grizzled prospector seeking a fortune with a pickax, a tin pan, and a burro are long past. Today's prospectors are multinational corporations that scar and ravage the land with giant earth-moving machines and lethal acids like cyanide. But although our attitudes toward public resources have changed since the 19th century, the Mining Law has remained virtually untouched.

Even more galling, the same mining industry that benefits so handsomely from Congress' generosity has successfully used its money and lobbying influence to preserve this sweetheart deal. Meanwhile, members of Congress who perpetuate this unbelievable scam are never held accountable, because the public knows little, if anything, about the abuse. While this outrage surpasses most scandals that receive massive press coverage, it continues to escape notice.

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 comers 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 companies argue that they cannot afford to pay royalties because of the costly nature of their operations. Yet somehow they can and do pay handsome royalties for the privilege of mining on private lands or state lands. The Newmont Mining Company, for instance, is paying a private landowner an 18 percent royalty for the right to extract gold from his land in Nevada. The land is within spitting distance of a Newmont gold mine located on federal property, on which the company pays no royalties. How much is this quirk of the law costing taxpayers? It's estimated that billions of dollars worth of minerals are extracted from federal lands each year; it's also estimated that the average royalty paid by mining companies to private landowners is about 5 percent. So extending that royalty to public lands could produce more than $100 million per year for taxpayers.

But the 1872 Law doesn't just allow companies to stake a claim and then mine public lands without paying royalties. It also gives them the option of buying that public land forever--at rock bottom prices. If the claim-holder can prove to the Department of Interior that his claim contains commercially producible hardrock minerals, then the government must grant the applicant a deed or "patent" to the lands for the princely sum of between $2.50 to $5 per acre. According to the Mineral Policy Center, more than 3.2 million acres of public lands packing $243 billion worth of hardrock minerals have been patented since 1872. Yet once a claimant has been granted a parent, he is not required to mine the land he's bought. He can use it for any purpose. Patented claims have become sites for vacation home developments, Junk yards, tourist traps, casinos, and golf courses.

Mining Our Pockets

Beginning in 1990, I attempted to include a provision in the Department of Interior appropriations bill to prohibit the processing of new patent applications. The mining industry narrowly defeated this proposal. I continued my efforts each year until 1994, when a House-Senate conference committee finally imposed the patent moratorium. Unfortunately, many of the most valuable claims were either already patented or were excluded by a grandfather clause.

For instance, just four days after the Senate voted 50 to 48 to defeat my patent moratorium amendment in 1990, the Stillwater Mining Company filed applications for patents on 2,000 acres of national forest land in Montana. For just $10,000 Stillwater will gain title to land containing platinum and palladium reserves worth more than $35 billion. Similarly, in 1989, an Oregon family patented 780 acres of land containing silica in the National Dunes Recreation Area for $1,950. Shortly after the patent was issued, the Department of Interior decided the land, which attracts more than 2 million visitors a year, should not be mined, and sought to buy back the land. The new owners offered to sell the land back--for $11 million.

Many of the hardrock miners that managed to slip in patent applications before the moratorium are foreign-owned companies. Take Barrick Resources, a Canadian corporation that touts itself as the most profitable mining company in the world. In 1994 Barrick obtained patents on more than 1,800 acres of public land in Nevada. In exchange for approximately $9,000, what did Barrick get? More than $10 billion worth of gold--one of the largest deposits in U.S. history. With that kind of steal it's no wonder Barrick has become the world's most profitable mining company.

As if the hard-rock miners weren't getting a sweet enough deal, they're also allowed to enjoy a special tax break. Here's how it works. Because mining companies must often pay a high premium to buy land that is rich in mineral deposits, the government allows them to recover that premium by taking a tax deduction on the value of the minerals they subsequently extract. This is not in itself unreasonable. After all, the land the mining companies purchase is an asset--and the more they extract from that land the more it depreciates in value, so it's only fair for their tax bill to reflect that. However, companies that mine public land not only do not pay a premium for the minerals in that land, they are able to purchase the land at the below-market, laughable rate of $2.50 per acre. Yet, incredibly, these companies are still allowed to take the tax deduction on the value of the minerals they extract. Talk about double-dipping! The cost to taxpayers: almost $100 million a year.

It's hard to believe that at a time when the average citizen considers himself grossly and unfairly taxed, Congress would tolerate such an unconscionable giveaway of billions of dollars in minerals to the wealthiest corporations in the world and, through the tax deduction, literally pay them to take the minerals. To paraphrase an old song, the mining companies get the gold and the taxpayers get the shaft.

But these excesses are just the tip of the iceberg. As I mentioned earlier, the taxpayers are often left to pick up the tab for cleaning up the mess--acid waste, polluted streams, and unreclaimed open pits--that mining companies leave in their wake. The Mineral Policy Center estimates it will cost upwards of $71.5 billion to reclaim the more than 557,000 abandoned hardrock-mining sites in the United States. More than 50 of these sites are already on the Superfund National Priority List. Industry apologists argue that reclamation and other environmental problems associated with hardrock mining are a thing of the past. They should tell that to the people of Rio Grande County in Colorado. In 1986, Summitville, another Canadian mining company, opened a gold mine in Rio Grande County. In June of that year, a pad and protective finer at the site failed, allowing cyanide to seep into the ground. Summitville's parent company subsequently declared bankruptcy, leaving only a $4.7 million bond for reclamation. The EPA had to hire 55 full-time workers, and taxpayers are, at this moment, spending $33,000 per day to prevent cyanide from spilling into the headwaters of the Rio Grande. Before the clean-up is complete, taxpayer costs are predicted to reach up to $60 million.

Rather than working to develop updated environmental standards to prevent future disasters, the mining industry continues to fight efforts to improve environmental regulations. They argue that tougher standards would increase their costs of doing business. When the Interior Department recently announced its intention to update the regulations regarding mining on public land, the industry attacked, tapping its allies in the Senate to include a provision in the Department of Interior appropriations bill that would prevent the department from even working on new regulations unless all the governors of the Western states signed off on them. Fat chance! Only after the White House threatened a veto did senators from the West agree to allow the department to proceed with preparation of the regulations.

Mining Their Own Business

My eight-year battle to reform the hardrock-mining laws of this country has been a lonely one. But it should be noted that my chief co-sponsor, Sen. Judd Gregg (R-NH) has been a staunch ally. Reps. Nick Joe Rahall (D-WV) and George Miller (D-CA) have also fought valiantly for reform in the House. However, their efforts have also been stymied. The problem: The mining interests have spent millions upon millions to keep this sacred law in force. In 1993, the House actually passed a comprehensive reform bill by a nearly 3-to-1 margin. But, the measure stalled in a House-Senate conference as senators from the West threatened to filibuster any bill that would establish a royalty similar to the kind mining companies pay private landowners. Archaic Senate rules allow a small minority to block legislation and Western-state senators have used them to thwart efforts to reform the 1872 Mining Law time and again.

It is certainly understandable that legislators from states in which the mining industry is a major force would be supportive of that industry. However, a large number of senators, most of whom have no mining in their states, continue to vote with the Western bloc. While the desire for campaign contributions from mining interests is certainly one explanation for many legislators' unwillingness to reform the Mining Law, it is not the only one. The sad fact is that many members of Congress are happy to support other members' parochial interest if they feel comfortably certain that the voters back home won't know or care about the issue. It's called a "freebie," a bad vote that has no political repercussions and which the lawmaker can cash in when he's gathering support for his own interests. It's only natural that each member feels a duty to protect their provincial interests back home. But when those interests fly in the face of the obvious national interest, it becomes the duty of the other members to tolerate it no longer. Unfortunately, such has not been the case with this unseemly law.

When speaking to their local chambers of commerce and Rotary Clubs, members of Congress often promise to guard taxpayers' money as if it were their own. But how many landowners would sell their gold- or silver-laden lands for $2.50 per acre and not even demand a royalty? It is long past time to start treating the taxpayers with respect rather than contempt. It is time to chisel the 1872 Mining Law out of the U.S. Code and send it to the Smithsonian Museum where it belongs.

It seems incomprehensible that Congress would allow this abuse of taxpayers, to continue. When I first heard about the 1872 Mining Law, I was incredulous. How could this be? Well, as my mother used to say, "Everybody's business is nobody's business." And the unpleasant truth is that it is much more important to the mining industry and members of Congress from mining states to maintain the status quo than it is for the public, largely unaware that it is being used and abused, to demand and achieve change.

Sen. Dale Bumpers is the senior senator from Arkansas and the ranking member of the Senate Energy and Natural Resources Committee.