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Annie, get your Guccis.

Land-use laws made for cowboys and small miners have given Anheuser-Busch and Met Life the run of the West

When Congress first debated the law that was to regulate mining on the vast public lands in the West, lawmakers envisioned idylls in which struggling miners would build "little homes [and] raise peach trees and potatoes." By virtually giving miners the land on which they staked their claims and asking for no return on any minerals they found with their pickaxes and mules, lawmakers hoped to attract industrious pioneers who would set down roots and form the backbone of taxpaying communities.

That was 1866. This is today:

Newmont Mining Corporation used satellites, not pans, to prospect for gold, bulldozed huge pits in the Nevada earth, soaked more than 150 million tons of excavated din with a cyanide solution, extracted 1.68 million ounces of gold in 1990, and walked off with $342 million in net income. European financiers Jacob Rothschild, Sir James Goldsmith, and associates, who own 49 percent of the corporation, paid no royalties to the U.S. government for the gold and no rent on the land--which the federal government sold to them for a filing fee of between $2.50 and $5 an acre.

Pouring cyanide solution over low-grade ore, known as "heap leach" mining, is responsible not only for the resurgence of the mining industry in the United States over the last decade, but also for scarfing the arid western landscape and contaminating its groundwater. So much for little homes and peach trees.

The mining statutes aren't the only federal subsidy helping Newmont bilk America. The company also enjoys the benefits of a below-cost federal grazing program, originally designed to help keep family-owned sheep and cattle ranches in business. Newmont wholly owns the Elko Land and Livestock Co. in Battle Mountain, Nevada, adjacent to its mining lands. The ranch controls 73,347 acres of public rangeland. Last year, Newmont paid the government $24,114 to graze its cattle. Grazing the same head of cattle on subleased private land would have cost Elko anywhere from $85,687 to $118,248, according to various government and independent estimates.

Not only is Elko getting a fat break, but the government is actually losing money on the deal. Just to break even on the grazing fee program, the federal government would need at least $35,000 from Elko, according to conservative Forest Service estimates. That means the government is effectively paying Elko to use public lands.

If Newmont and Elko represent eighties' welfare for the rich at its most outrageous, they have plenty of corporate company. Today, thanks to outdated laws and lax federal oversight, a cozy power elite controls a huge amount of America's valuable natural resources and vanishing open spaces.

Among those benefiting from the grazing laws are Getty Oil, Texaco, Chevron, Anheuser-Busch, Utah Power and Light, John Hancock Life Insurance, Metropolitan Life Insurance, Japanese-owned Zenchiku Land and Livestock, and the Mormon Church. Among the individual owners are George Gillett, who built his broadcasting, beef-packing, and real estate empire with junk bonds; billionaires David Packard and William Hewlett, of Hewlett-Packard computer fame; and J.R. Simplot, an Idaho millionaire who made his fortune supplying McDonald's with potatoes for french fries.

Who are the winners under the mining laws? Eighteen of the top 25 gold mines in the United States are either wholly owned subsidiaries of foreign companies or have at least 40 percent foreign ownership, and none pays royalties or rents on public lands, even though the total value of gold production in the United States in 1990 reached nearly $3.7 billion. Ten large mines now account for 66 percent of U.S. hardrock mineral production and 75 percent of all U.S. mineral reserves.

If the government charged the same 12.5 percent royalty on gross hardrock mineral production that it does on oil, gas, and coal leases, it could have taken in upwards of $500 million last year alone.

Still, in the long run, the greatest damage done by these antiquated laws has to do, not with money, but with quality of life. The current federal policies, while benefiting the few at the expense of the taxpayer, have left a huge percentage of America's public lands strip-mined, blighted by clearcuts, crowded by condominiums--and utterly out of public control.

Mine your own business

Back in the 19th century, when Congress debated how to distribute the country's mineral wealth, lawmakers sounded a little like Jack Kemp extolling the virtues of tenant ownership of public housing. Simply leasing lands attracted an unsavory lot-- "[drawing] into the mining regions a population of vagrants, gamblers, and ruffians, excluding sober and intelligent citizens, and making the establishment of organized civil communities impossible," according to a congressional report. "Their houses were hovels and shanties."

Selling lands to be mined, on the other hand, was associated with attracting "a new class of men... [who] took possession... as the owners of the soil, brought their families with them, laid the foundations of social order, expelled the barbarians who had secured a temporary occupancy, and thus at once promoted their own welfare, the real prosperity of the country, and the financial interest of the government."

Thus began the system of "patenting," or moving public lands into private ownership. Since then, more than 1.2 million acres have passed from the public domain into private hands. The United States is the only country to have such a system for hardrock mining, and mining is the only natural-resource industry in the country that, by law, can buy public lands. In rich mining districts in Australia, Canada, and South Africa, miners can only obtain land leases or concessions for a term of anywhere from two to 20 years. These countries require mining companies to pay mineral royalties, rents, and/or severance tax. Even in the United States, oil, gas, and coal deposits are leased to companies. The federal government retains property rights.

Reasonable mining companies admit they don't need to own land in order to mine it, as long as they are assured full title to whatever minerals they find. Yet the mining law gives miners the right to stake claims just about anywhere on any federal land outside national parks, wildlife refuges, and wilderness areas--forever. A miner needs only to do $100 worth of work every year--a hefty sum a century ago-- while he is in the nebulous process of discovering whether economic mineral deposits exist. That's it.

After five years of this $100-a-year "diligence" work, a miner can apply to patent a claim if he's "proved up," or found mineral deposits sufficient to make a prudent man want to develop a mine. That's where the $2.50 and $5 per acre filing fee comes in. Since the law's inception, the General Accounting Office (GAO) estimates that an area the size of Connecticut has been taken private for such prices. In a review of 20 patents issued since 1970, the GAO found in 1989 that the government was paid less than $4,500 for lands valued at between $13 and $47 million.

But those numbers don't touch the real loss involved when America sells off its natural resources. Today, for instance, Chevron is in the process of buying the 1,7 14-acre Stillwater Mine in Montana, 40 miles north of Yellowstone, for the whopping sum of $8,570. According to the nonprofit Mineral Policy Center, the platinum and palla- dium held there are worth an estimated $30 billion.

Some patenters don't actually mine the land they own, but that doesn't mean they're leaving the land untrammeled. With patent in hand, you can do anything you want with your acreage. In 1990, GAO investigators found plush vacation homes on mining claims in Tahoe, Nevada, and adjacent to scenic ski resorts in Colorado; hazardous chemicals stored on a claim in the Mojave Desert in California; and marijuana farms and communes on claims in Northern California.

But risk-averse "miners" don't build; they sell. In 1983, a 160-acre mining claim in the popular ski resort of Keystone, Colorado, was patented for $400. Six years later, the owners were asking $11,000 an acre. In 1986, miners paid the government $42,500 to patent 17,000 acres of oil shale land in Colorado. Just a few weeks later, the patent holders sold them to major oil companies for $37 million.

Patenting generally favors the bigger, corporate operators because they, unlike the small miner, can afford it. These days, when nearly all easy-to-find surface mineral deposits have been mined out, proving up a claim costs a lot of money--for drilling, surveys, and lawyers. Patenting also means that bigger companies can take the time to sit on claims for years, waiting for metals prices to rise before bringing mines into production.

Yet when reformers like Senator Dale Bumpers of Arkansas and Rep. Nick Joe Rahall of West Virginia suggest ending the practice of patenting new claims, they run up against "tradition." The industry-supported American Mining Congress and lawmakers who toe their line cast themselves as the protectors of America's small miner. The reality is, except in Alaska, the number of small miners has declined in recent years. And these days their role is not necessarily to mine at all. Instead, when independent miners find something, they usually head straight to the majors, who then lease the claim from the miner for exploration.

Still, most western lawmakers become apoplectic at the mere mention of reform, predicting that mining companies will be forced out of the country. In the Senate, these same western lawmakers--like Wyoming's Malcolm Wallop, New Mexico's Pete Domenici, Idaho's Larry Craig, and Montana's Conrad Burns--have influence over the Energy and Natural Resources Committee, where reform laws would be considered. Not surprisingly, although Bumpers has been able to force two hearings on the subject, no bills or amendments have been considered that even approach the subject of revising the mining laws.

Meanwhile, domestic mining interests have been nurturing the support of key politicians. For instance, Amax Inc., a gold-mining company, contributed $22,000 to some of the Senate's staunchest protectors of large mining interests in the 1989-90 election cycle. Corporate officers and directors of Amax Gold and Amax Inc. gave nearly $10,000 more to the same folks and the Republican National Committee.

Newmont's PAC, interestingly, donated only $2,700 to Nevada and Colorado lawmakers in 1990 and $3,000 so far this year. But Newmont and several of the corporate operators in the resource business have other, probably more compelling, political ammunition in these sour economic times: jobs. Newmont employs 3,000 people in Nevada. And if that doesn't make a strong enough case for a lawmaker's undying support, Newmont has also contributed $2 million since 1987 to local schools, hospitals, and community programs--even paying for the Elko Cinderella Girls Pageant.


Of course, the federal government's corporate welfare programs take care of Americans, too. In the November/December issue of Beef Today magazine, there's a profile of one prominent aid recipient: Alan Day, brother of Supreme Court Justice Sandra Day O'Connor. The rancher runs a 160,000-acre spread in Arizona, 72 percent of which is public land. According to federal government tabulations, Day's operation has been subsidized at about $150,000 a year for the last decade.

Day is one of about 26,000 ranchers who hold grazing permits on 300 million acres of federal land, much of which either connects pastures or lies contiguous to private ranches. While Day fervently denies he is "subsidized" by the government, fees charged under the grazing program--set up in the thirties--are kept artificially low. Although the fee takes into account the fluctuation of yearly beef and forage-value prices, oil prices, and other variables, the base number used to calculate it was set in 1965 and hasn't budged since. Thus--though western politicians hate to admit it-- the federal program hasn't paid for itself in years. According to a grazing fee study by the Departments of Agriculture and Interior released this spring, public land ranchers have paid less than 25 percent of the costs of the federal grazing program over the past 10 years. Last year alone, the government lost $65 million on the program.

While western lawmakers invoke the mythic cowboy and small-time rancher to defend the subsidies, just as they do in mining, the average beneficiaries of this program aren't Hoss and Little Joe, they're Hewlett and Packard (they own the San Felipe Ranch in Mackay, Idaho). The billionaire Koch brothers, owners of Koch Industries, an independent oil concern, pay $27,000 less each year on their Matador Cattle Company ranch than if they were leasing private land. And the John Hancock company gets a break on its ranch of about $50,000 a year.

The ZX Ranch in eastern Oregon runs about 10,000 cattle and controls 672,000 acres of public land--a stretch just a tad smaller than Rhode Island. ZX managers say it "holds its own" in terms of profitability. That must be a relief for its owner, Metropolitan Life Insurance Company, which is now busily increasing its holdings by buying out small owners in Wyoming's Big Horn Mountains.

Met's hegemony is not uncommon. According to a 1986 Department of Interior study, an estimated 10 percent of the federal grazing permit holders controlled 91.7 percent of the land. Clearly, these grazing permit holders can afford to pay the government fair grazing fees on the public lands they use. Yet, like the mining patents, the grazing fees are western politicians' sacred Herefords. Although the antiquated grazing fee expired in 1985, President Reagan extended it by executive order after intense lobbying by western lawmakers. Senate hearings to begin discussing whether the fee is fair have yet to be scheduled.

On the House side, Oklahoma Rep. Mike Synar's bill to raise the grazing fee 400 percent over the next few years passed the House last summer, only to be killed in a "corn for porn" compromise with the Senate over funding for the National Endowment for the Arts. Synar blames party and constituent politics. "Some of the richest Republican donors are on the list of those who hold federal grazing permits," he says. "Republicans are throwing their bodies in front of the train to save their benefactors." But it's not just Republicans. Even generally pro-environment Democrats like Senators Tim Wirth and Max Baucus jumped on the western bandwagon last year when the subject of increasing grazing fees was debated.

One reason is that cattlemen, like miners, are generous donors. David Packard doled out $17,300, primanly to western lawmakers. Gillett, one of the top 10 public land ranchers in the nation, donated nearly $10,000 to westerners like Colorado Republican Senator Hank Brown. And the National Cattlemen's Association PAC, while coming nowhere near the contributions of oil and gas companies, kicked in $215,384 in the last election cycle, mostly to westerners and those who sit on committees that control public lands. (In addition, it created mock "Wanted" posters with grizzled likenesses of Synar and his allies.)

The western stonewall worked--and works. As with mining reform, no heatings have been held, and the key Energy and Natural Resources Committee has considered no bills or amendments to bring the grazing laws into the nineties. In fact, thanks to a jump in the price of diesel fuel during the Persian Gulf war, the grazing fee will actually drop next year --thus the bill for taxpayers will go up again.

Ironically, the solution to the grazing problem lies right out there in the West, alongside those intransigent ranchers. In 1988, Jim Baca, public lands commissioner in New Mexico, nearly doubled the grazing fee to fair market value on state lands, and is beginning public heatings on a proposal that would give up to a 25 percent discount to ranchers who keep public lands in good condition. New Mexico ranchers raised a ruckus when the grazing fee jumped, vowing an exodus, but since the fee raise, not one of 3,200 lease-holders has turned in a lease because of the increase.

While some extreme environmental groups call for "No Moo in '92" to end overgrazing on public lands, Baca is treading a middle path. His policies encourage "enlightened" ranchers who graze their cattle like the buffalo grazed the Great Plains: The animals graze in a pack, which cultivates the soil, and are rotated to different pastures every few days to allow new grass to grow. "The federal government has to realize that there is a way of getting a more sustainable economy ... and keeping the quality of life out West," Baca says.

As for mining? While westerners have traditionally been distrustful of all things foreign, this is a case in which America has a lot to learn from Australia, Canada, and South Africa, the other big mining countries. Their governments charge anywhere from 2.5 to 12 percent in rents and royalties for extracting hardrock minerals from government-owned lands. Miners are allowed to explore on claims for no longer than 10 or 20 years and the lands never go private. Has that hurt those countries? In Australia, each province has its own system of charging rents and royalties. Queensland, for example, takes 5 percent of all profits over $30,000. Still, gold production nationwide quadrupled between 1984 and 1988. Miners go where the ore is, even if they have to pay a little more to get it.

Still, those ideas are just a start. Real reform would require an even more substantial commitment by Congress and the federal government to resist appeasement of industry and adopt long-term economic and environmental planning for the West. The next steps should be:

*Consistent land use decisions. Before any land is given over to mining or ranching, its undisturbed value must be weighed. This is unavoidably subjective, but decisions should require public involvement, not just cozy negotiations between corporations and the feds.

*Resource extraction under long-term lease, not sale. Rent should be set by open auction so that alternate uses will compete. Mining companies could still prospect and make temporary claims, but they would pay the market value to mine. Speculatory claim-sitting would be discouraged by a rapidly escalating rent on claims.

*Rents that cover at least the expected costs of administration, roads, and other government subsidies.

*Restoration requirements. Once leases have expired, land and the water that flows over and through it must be restored to pre-mined (or grazed) condition. Extraction companies should be compelled to make a financial guarantee, such as a bond, to cover the likely cost of this work.

*Citizens' fights to sue for judicial review of government agencies' land use decisions.

Resources in the West have always been considered "gifts from God," free to those with enough gumption to extract them. But as the West has changed, so have the nation's priorities. After an era committed to manifest destiny and domesticating the frontier, we now need politicians with the gumption to enact new laws to help us preserve both the land and a hard-won way of life--instead of the fortunes of Hewletts, Packards, insurance companies, and foreign conglomerates.
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Title Annotation:exploitation of land-use laws by major corporations
Author:Schulte, Brigid
Publication:Washington Monthly
Date:Jul 1, 1992
Previous Article:High stakes, low courts.
Next Article:An American melting pot.

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