Babbitt Tests Old-West Law To Boost Mining Development

IT LOOKS more and more as if the 122-year-old law that governs hardrock mining across the American West will live to be 123.

Efforts to reform what US Secretary of the Interior Bruce Babbitt recently called ``a historical outrage'' are weighted down with a motherlode of congressional gridlock.

House and Senate versions of bills to change the General Mining Law of 1872 are far apart, and some Western lawmakers are threatening to filibuster if they don't get their way.

Meanwhile, the legislative clock is ticking toward summer break and then the fall elections, after which the 103rd Congress will disband.

``There's not a lot of time,'' says Beverly Reece of the Mineral Policy Center, an organization trying to change the law that applies to mining of gold, silver, copper, platinum, and uranium on federal land.

Signed into law by President Ulysses S. Grant, the law was designed to encourage miners to find value in the rocky, bone-dry land most homesteaders had no interest in.

They could file a claim for a relatively small fee and, if there were signs of valuable minerals, obtain a patent (title) for as little as $2.50 an acre. And, unlike those who seek oil, gas, and coal, hardrock miners do not have to pay royalties to the federal government.

Supporters of the law say it has spurred development in the West, where mining is not only a way of life, but the basis for economic well-being in many communities. A study by the Western Economic Analysis Center in Marana, Ariz., showed that Arizona's copper industry contributed $5.68 billion to the state's economy last year. This included a $472 million payroll for Arizona's 11,800 copper workers and more than $200 million in federal, state, and local taxes.

In Nevada, called the Silver State, mining accounts for 13,000 direct jobs averaging an annual wage of $40,000. And Rep. Barbara Vucanovich (R) of Nevada points out that much of the equipment used in Western mining comes from manufacturers back East.

Uncertainty about the future of federal mining law could drive United States companies elsewhere, warns Michael Brown, vice-president of the Gold Institute.

``Mining law reform is not occurring in a vacuum,'' he says. ``This is a global business, and dollars will flow to the best investment climate.... Actions such as Mexico's abolition of its 7 percent national mining tax certainly go a long way to creating a competitive investment climate.''

There are, however, other opinions on the economic impact of reforming the mining law.

An 86-page analysis by Thomas Power, chairman of the Economics Department at the University of Montana, concludes that passage of the more-stringent US House bill authored by Rep. Nick Rahall (D) of West Virginia would result in a net gain of 1,200 jobs. Most of these would be in reclamation of abandoned mines in order to make them safe and environmentally sound.

Cleanup of abandoned mines and stricter environmental regulation of mining operations is a big part of the debate. Dozens of abandoned mines are on the priority list for cleanup under the Superfund toxic waste law. Many large mining operations use a cyanide solution to obtain small amounts of gold from large piles of ore.

With gold prices a bit under $400 an ounce, this ``heap leach'' method of mining is profitable. But it also can poison, and environmentalists say has poisoned, wildlife and water supplies. Critics of cyanide mining are gathering signatures in Oregon to strictly regulate the practice.

But it is the question of private profits from public land that is causing most of the controversy. Congressman Rahall calls the lack of any royalty payments ``legalized plundering'' of the US Treasury. The National Taxpayers Union is pushing for royalties.

Last month Interior Secretary Babbitt was ordered by a federal court to transfer ownership of nearly 2,000 acres in central Nevada to the Toronto-based American Barrick Resources Company for less than $10,000.

The company legally obtained the Goldstrike Mine under the 1872 law's patenting process.

Noting that gold deposits there may be worth as much as $10 billion, Mr. Babbitt called it ``the biggest gold heist since the days of Butch Cassidy.''

The Barrick Company responds that it is putting its own capital ($62 million to purchase the claim and about another $1 billion in exploration and extraction costs so far) into a risky business and creating hundreds of jobs.

There are more than 600 mining patents pending, and some companies apparently are hustling to obtain title before the law is changed. Echo Bay Exploration recently sued the Interior Department, claiming Babbitt was dragging his feet on issuing titles for the McCoy and Cove mines in Nevada.

Rahall's bill, passed in the House, would impose an 8 percent royalty on the gross revenues from hardrock mining, end the patenting system (thereby retaining government ownership), and provide for environmental reclamation of mining operations and restoration of abandoned mine sites.

The US Senate has passed an industry-favored bill written by Sen. Larry Craig (R) of Idaho that includes a 2 percent royalty on net revenues, retains patent rights, and has no reclamation or restoration provisions.

Sen. Bennett Johnston (D) of Louisiana, chairman of the Energy and Natural Resources Committee, recently offered an amendment making that 2 percent royalty apply to gross revenues. This would bring in more federal revenues, but it is still a long way from what the House passed.

Meanwhile, according to General Accounting Office estimates, some $1.7 billion in hardrock minerals is being dug from federal lands each year.