<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:55675.wais]
OVERSIGHT HEARING ON MINING, THE AMERICAN ECONOMY AND NATIONAL
SECURITY--THE ROLE OF PUBLIC LANDS IN MAINTAINING A NATIONAL ASSET
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY
AND MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
FEBRUARY 23, 1999, WASHINGTON, DC
__________
Serial No. 106-10
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
or
Committee address: http://www.house.gov/resources
55-675 <l-ar/r-ar> U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1999
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana GEORGE MILLER, California
JAMES V. HANSEN, Utah NICK J. RAHALL II, West Virginia
JIM SAXTON, New Jersey BRUCE F. VENTO, Minnesota
ELTON GALLEGLY, California DALE E. KILDEE, Michigan
JOHN J. DUNCAN, Jr., Tennessee PETER A. DeFAZIO, Oregon
JOEL HEFLEY, Colorado ENI F.H. FALEOMAVAEGA, American
JOHN T. DOOLITTLE, California Samoa
WAYNE T. GILCHREST, Maryland NEIL ABERCROMBIE, Hawaii
KEN CALVERT, California SOLOMON P. ORTIZ, Texas
RICHARD W. POMBO, California OWEN B. PICKETT, Virginia
BARBARA CUBIN, Wyoming FRANK PALLONE, Jr., New Jersey
HELEN CHENOWETH, Idaho CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California CARLOS A. ROMERO-BARCELO, Puerto
WALTER B. JONES, Jr., North Rico
Carolina ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas PATRICK J. KENNEDY, Rhode Island
CHRIS CANNON, Utah ADAM SMITH, Washington
KEVIN BRADY, Texas WILLIAM D. DELAHUNT, Massachusetts
JOHN PETERSON, Pennsylvania CHRIS JOHN, Louisiana
RICK HILL, Montana DONNA CHRISTIAN-CHRISTENSEN,
BOB SCHAFFER, Colorado Virgin Islands
JIM GIBBONS, Nevada RON KIND, Wisconsin
MARK E. SOUDER, Indiana JAY INSLEE, Washington
GREG WALDEN, Oregon GRACE F. NAPOLITANO, California
DON SHERWOOD, Pennsylvania TOM UDALL, New Mexico
ROBIN HAYES, North Carolina MARK UDALL, Colorado
MIKE SIMPSON, Idaho JOSEPH CROWLEY, New York
THOMAS G. TANCREDO, Colorado
Lloyd A. Jones, Chief of Staff
Elizabeth Megginson, Chief Counsel
Christine Kennedy, Chief Clerk/Administrator
John Lawrence, Democratic Staff Director
------
Subcommittee on Energy and Mineral Resources
BARBARA CUBIN, Wyoming, Chairman
W.J. (BILLY) TAUZIN, Louisiana ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas NICK J. RAHALL II, West Virginia
CHRIS CANNON, Utah ENI F.H. FALEOMAVAEGA, American
KEVIN BRADY, Texas Samoa
BOB SCHAFFER, Colorado SOLOMON P. ORTIZ, Texas
JIM GIBBONS, Nevada CALVIN M. DOOLEY, California
GREG WALDEN, Oregon PATRICK J. KENNEDY, Rhode Island
THOMAS G. TANCREDO, Colorado CHRIS JOHN, Louisiana
JAY INSLEE, Washington
------ ------
Bill Condit, Professional Staff
Mike Henry, Professional Staff
Deborah Lanzone, Professional Staff
C O N T E N T S
----------
Page
Hearing held February 23, 1999................................... 1
Statements of Members:
Cubin, Hon. Barbara, a Representative in Congress from the
State of Wyoming........................................... 1
Prepared statement of.................................... 3
Gibbons, Hon. Jim, a Representative in Congress from the
State of Nevada............................................ 6
Rahall, Hon. Nick, a Representative in Congress from the
State of West Virginia, prepared statement of.............. 24
Underwood, Hon. Robert A., a Delegate in Congress from Guam.. 4
Prepared statement of.................................... 5
Statements of witnesses:
Brobst, Dr. Donald, Society of Economic Geologists........... 25
Prepared statement of.................................... 33
d'Esposito, Stephen, President, Mineral Policy Center........ 11
Prepared statement of.................................... 58
Lawson, Richard L., President, National Mining Association... 7
Prepared statement of.................................... 46
Additional material submitted by......................... 38
Additional material submitted by......................... 40
McKinley, Michael J., Minerals Information Team, U.S.
Geological Survey.......................................... 9
Prepared statement of.................................... 32
Menzie, Dr. David W., Minerals Information Team, U.S.
Geological Survey.......................................... 22
Prepared statement of.................................... 80
Silver, Douglas, Balfour Holdings, Inc....................... 21
Prepared statement of.................................... 71
Additional material supplied:
Dobra, John L., PhD., Director, Natural Resource Industry
Institute, prepared statement of........................... 106
Drozdoff, Leo M., Division of Environmental Protection,
additional comments of..................................... 102
Evans, Michael K., President, Evans Group, material submitted
by......................................................... 138
Freeport-McMoRan Copper & Gold Inc., Washington, DC, Excerpt
from 1998 Annual Report.................................... 95
King, W. Russell, Senior Vice President, Freeport-McMoRan
Copper & Gold Inc., Washington, DC, prepared statement of.. 40
Lutley, John, President, The Gold Institute, material
submitted by............................................... 148
Menzie, Dr. W. David, USGS, additional material submitted by. 112
Milling-Stanley, George, World Gold Council, prepared
statement of............................................... 104
Silver, Douglas, President, Balfour Holdings, Inc., material
submitted by............................................... 125
OVERSIGHT HEARING ON MINING, THE AMERICAN ECONOMY AND NATIONAL
SECURITY--THE ROLE OF PUBLIC LANDS IN MAINTAINING A NATIONAL ASSET
TUESDAY, FEBRUARY 23, 1999
House of Representatives,
Subcommittee on Energy and
Mineral Resources,
Committee on Resources,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2 p.m., in
Room 1324, Longworth Office Building, Hon. Barbara Cubin
[chairwoman of the Subcommittee] presiding.
STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WYOMING
Mrs. Cubin. I want to welcome all of you to the
Subcommittee hearing, and certainly, the new Ranking Member,
Mr. Underwood. I am delighted to have you in this position, and
I know we will have a lot of issues that we will be working on
together.
We don't have votes until 5 p.m., and that is one of the
reasons that we don't have more members here for the
Subcommittee hearing. I think that this is important that we go
ahead and get everything accomplished that we can for the
record.
So, I do want to welcome the witnesses and members of the
public to this inaugural hearing of the Subcommittee on Energy
and Mineral Resources, of the 106th Congress. Before we get
down to today's hearing, though, we do have some new members on
the Subcommittee and I was going to introduce them, but since
they are not here, I will just tell you about them. We have Bob
Schaffer from the fourth district of Colorado, who was a member
of the Resources Committee last year, but not of this
Subcommittee; Congressman Greg Walden of the second district of
Oregon, and Tom Tancredo, of the sixth district of Colorado. On
the other side of the aisle, Mr. Underwood, the Delegate from
Guam, as I already mentioned, is our Ranking Member for the
106th Congress. We have already discussed some things that we
will be working on, and I don't know if you wanted to talk
about your new members or if you want me to mention them. There
they are.
[Laughter.]
We have Delegate Faleomavaega from American Samoa, and
Congressman Patrick Kennedy from the first district of Rhode
Island is a new member on the Subcommittee, and Congressman Jay
Inslee from the first district of Washington. I am looking
forward to working with all the new members.
Today's hearing will address concerns the Subcommittee has
regarding the domestic hardrock mining industry and the role of
public lands in providing an exploration base for the discovery
of new metal mines to replace dwindling reserves. Last
Congress, the Subcommittee dedicated a lot of time and energy
to problems of the oil and gas producers on public lands,
including the Outer Continental Shelf. There remains serious
concerns and serious problems about the continuing viability of
independent oil and gas producers in this country within the
dismal price environment for both crude oil and natural gas
over the last year and one-half or so. So there are things that
we have yet to try to resolve to help gain access to public
lands for purposes of exploration and production, but not just
in oil and gas, in mining as well.
Metal prices are similarly depressed, perhaps not as much
as in the petroleum industry, but they are depressed, as are
many basic commodity prices, as a result of the slowdown in the
global economy, for one thing. Yet, society continues to demand
goods fabricated with metals and non-metallic minerals which we
may import in the raw or finished state. Furthermore, the U.S.
became the world's second largest producer of gold about a
decade ago, a net exporter of the metal, which improves our
balance-of-trade picture. So it is important that we help
bolster that industry.
Just last week, the Commerce Department announced that the
1998 trade deficit was the largest ever in terms of actual
dollars. It would have been even worse if we had not had the
contribution of our domestic mining industry and the energy
industries, too.
The Subcommittee will return to important business left
unfinished last year with regard to valuing oil and gas for
royalty purposes, and getting the Federal Government to aid,
not hinder, companies seeking to develop all manner of energy
and mineral deposits on the public lands and the OCS, and, of
course, we want this to be done in an environmentally-sound
fashion.
But coming from the West, coming from Wyoming, seeing the
reclamation in Wyoming, where you cannot tell where the virgin
land begins and the reclaimed land ends, I know that we can
develop these resources in an environmentally-sound manner and
still be good stewards to the land. Educating other members on
this Committee is something that I very much want to do. When
we took the leadership to the West, and we took some members
from the eastern States to the West the summer before last, and
they saw what we actually have in the West, how we have taken
good care of the public lands, how we've been able to produce
the resources, and save the environment at the same time, for
our children, and our children's children, it made a big
difference. So educating the members of the Subcommittee that
maybe have never seen what good mining practices are, is
something that we will be able to get to this year.
We have invited our witnesses today to give us an
``update'' on the role of public lands and hardrock mining in
the American economy and mining's overall contribution to the
national economy and to our military security.
Now that we are back from the President's Day recess, it
seems fitting to note that Abraham Lincoln recognized the
importance of a strong mining industry in a letter that he
wrote to the Speaker of the House of Representatives on the
afternoon of the date of his ``date with destiny''--you might
say, April 14, 1865. It was just before he went to Ford's
Theater. President Lincoln wrote, and this is a quote: ``I have
very large ideas of the mineral wealth of our Nation. I believe
it practically inexhaustible. It abounds all over the western
country, from the Rocky Mountains to the Pacific, and its
development has scarcely commenced. Tell the miners from me,
that I shall promote their interests to the utmost of my
ability; because their prosperity is the prosperity of the
Nation, and we shall prove in a very few years that we are,
indeed, the treasury of the world.''
Now, for a third or fourth consecutive year, the Clinton
Administration's budget request includes provisions which, if
enacted, would only harm, not help, our domestic miners in the
fight to stay competitive globally. Some of these are tax law
changes which are not the Committee's charge, they are not
under this jurisdiction, while others, such as royalties and
reclamation fees, do fall within our jurisdiction. We are not
looking at the details of such proposals today, however. We are
taking the long view to determine the role of public land, and
what role those lands should play in maintaining a key domestic
industry.
This administration has made it a mission to change the
manner in which hardrock minerals are disposed of on public
lands. That is to radically reform the Mining Law of 1872
through regulation, by statute, and huge land withdrawals, is
the way it appears to me. I think it is time to find out the
consequences that such attitudes have had, and will have, on
those who would invest their capital toward finding mineral
deposits and then developing mines. My hope is that, as with
the proposals to aid our domestic oil and gas producers, we can
find bipartisan solutions to the problems of our public lands
miners as well.
I now recognize our Ranking Member, Mr. Underwood, for any
opening statement that he might have.
[The prepared statement of Mrs. Cubin follows:]
Statement of Hon. Barbara Cubin, a Representative in Congress from the
State of Idaho
Today's hearing will address concerns the Subcommittee has
regarding the domestic hardrock mining industry and the role of
public lands in providing an exploration base for the discovery
of new metal mines to replace dwindling reserves. Last Congress
the Subcommittee dedicated much of its time to problems of our
oil and gas producers on public lands, including the outer
continental shelf--and there remain serious concerns about the
continuing viability of independent oil and gas operators in
the dismal price environment for both crude oil and natural gas
over the last year and one-half or so.
But, metal prices are similarly depressed (perhaps not as
much as for the petroleum business) as are many basic commodity
prices as a result of the slowdown of the global economy. Yet,
society continues to demand goods fabricated with metals and
non-metallic minerals which we may import in the raw or
finished state. Furthermore, the U.S. became the world's second
largest producer of gold about a decade ago, a net exporter of
the metal, which improves our balance of trade picture. Just
last week the Commerce Department announced that the 1998 trade
deficit was the largest ever in terms of actual dollars. It
would have been worse without the contribution of our domestic
mining industry--and energy industries, too.
The Subcommittee will return to important business left
unfinished last year with regard to valuing oil and gas for
royalty purposes, and getting the Federal Government to aid,
not hinder, companies seeking to develop all manner of energy
and mineral deposits on the public lands and the OCS, in an
environmentally sound fashion. However, our witnesses today
have been invited to ``update'' the Subcommittee on the role of
public lands hardrock mining in the American economy, and
mining's overall contribution to our national economy and
military security.
Now that Congress is back from the President's Day recess
it seems appropriate to note that Abraham Lincoln recognized
the importance of a strong mining industry in a letter he wrote
to the Speaker of the House of Representatives on the afternoon
of his date with destiny, April 14, 1865 before going to Ford's
Theater. President Lincoln wrote:
I have very large ideas of the mineral wealth of our Nation. I
believe it practically inexhaustible. It abounds all over the
western country, from the Rocky Mountains to the Pacific, and
its development has scarcely commenced. Tell the miners from
me, that I shall promote their interests to the utmost of my
ability; because their prosperity is the prosperity of the
Nation, and we shall prove in a very few years that we are
indeed the treasury of the world.''
Now, for the third or fourth consecutive year the Clinton
Administration's budget request includes provisions which if enacted
could only harm--not help--our domestic miners in the fight to stay
competitive globally. Some of these are tax law changes which are not
this Committee's charge, while others, such as royalties and
reclamation fees, do fall within our jurisdiction. We are not looking
at the details of such proposals today, however. Rather we are taking
the long view to determine the role public lands should play in
maintaining a key domestic industry.
This Administration has made it a mission to change the
manner in which hardrock minerals on public lands are disposed,
i.e., to radically reform the 1872 Mining Law, by statute or by
regulation changes and huge land withdrawals it would appear.
Its time to find out the consequences such attitudes have had,
and will have, upon those who would invest their capital toward
finding mineral deposits and then developing mines. My hope is
that as with the proposals to aid our domestic oil and gas
producers we can find bipartisan solutions to the problems of
our public lands miners.
I now recognize our Ranking Member, Mr. Underwood, for any
opening statement he may have.
STATEMENT OF HON. ROBERT A. UNDERWOOD, A DELEGATE IN CONGRESS
FROM GUAM
Mr. Underwood. Thank you, Madam Chairwoman. As the
Representative of Guam, I am always pleased to hear about the
Representatives from the West. I guess I am the furthest west.
I am so far west, I may be a little bit east of Washington.
[Laughter.]
But we certainly appreciate the opportunity to receive a
primer on the domestic hardrock mineral industry as our first
Subcommittee meeting during the 106th Congress. Hardrock
mineral production in this country occurs mainly in the West on
what is--or once was--public land under the 1872 Mining Law.
Many in the Congress, the media, and the public believe the
1872 law is antiquated and should be changed, while, overall,
the mining industry opposes reform.
On February 10, 1999, USA Today editorialized, ``Sure,
mining creates jobs and taxes, but the industry doesn't need
Federal subsidies to do that. Indeed, given the industry's
economic strength, the least it could do is pay a royalty on
the resources it extracts. The gas and oil industry creates
jobs and generates tax revenue, and invests in exploration and
pays royalties and still makes a bundle. More to the point, the
land-grabs authorized by the anachronistic 1872 Mining Law are
so outlandish that jobs and taxes are beside the point:
Taxpayers are getting snookered.''
Certainly, mining is a basic economic activity that
supplies the strategic metals and minerals that are essential
for agriculture, construction and manufacturing in the United
States. The U.S. Geological Survey has estimated the value of
U.S. raw nonfuel minerals production in 1998 at more than $40
billion, which was a slight decrease from 1997. The USGS said
the decrease occurred ``mostly because of falling metal
prices.'' They predict continued growth in the U.S. economy in
1999, but as a slower rate, providing a mild stimulus to the
Nation's mineral-consuming industries. USGS also notes that,
for the first time, the U.S. is now a net exporter of gold and
silver. They believe that there is as much gold and silver and
other hardrock minerals undiscovered as already extracted.
So, it is of concern to learn, as those new to this issue
do, that the individuals and corporations producing hardrock
minerals, located on and extracted from public lands, do not
pay a production fee or royalty to the United States. This is
unlike all other resources taken from public lands. For
example, oil, gas, and coal industries operating on public
lands pay a 12.5 percent royalty on gross income of the
operation. In addition, Indian tribes charge a royalty on all
types of mining, including hardrock mining. In 1990, the
average royalty paid to Indian tribes by copper mines was 13
percent. In the private sector, gold royalties range from 5 to
18 percent.
A number of colleagues, including Representative George
Miller and Nick Rahall, have advocated changing this situation
for many years. Again this year, with the support of many
Members of the House, they have introduced legislation to
reform the archaic 1872 mining law. We respectfully request, on
their behalf, that beyond this oversight hearing, the Chair
schedule at least one legislative hearing this year to take
testimony on these bills. I look forward to the testimony and
to learning more about hardrock mining. Thank you.
[The prepared statement of Mr. Underwood follows:]
Statement of Hon. Robert Underwood, a Delegate in Congress from Guam
We appreciate the opportunity to receive a primer on the
domestic hard rock mineral industry as our first Subcommittee
meeting during the 106th Congress. Hard rock mineral production
in this country occurs mainly in the West on what is--or once
was--public land under the 1872 Mining Law. Many in the
Congress, the media and the public believe the 1872 law is
antiquated and should be changed. While overall, the mining
industry opposes reform.
On February 10, 1999, USA Today editorialized, ``Sure,
mining creates jobs and taxes. But the industry doesn't need
Federal subsidies to do that. Indeed, given the industry's
economic strength, the least it could do is pay a royalty on
the resources it extracts. The gas and oil industry creates
jobs and generates tax revenue, and invests in exploration and
pays royalties and still makes a bundle. More to the point, the
land-grabs authorized by the anachronistic 1872 Mining Law are
so outlandish that jobs and taxes are beside the point:
Taxpayers are getting snookered.''
Certainly, mining is a basic economic activity that
supplies the strategic metals and minerals that are essential
for agriculture, construction and manufacturing in the United
States. The U.S. Geological Survey has estimated the value of
U.S. raw nonfuel minerals production in 1998 at more than $40
billion, which was a slight decrease from 1997. The USGS said
the decrease occurred ``mostly because of falling metal
prices.' And, they predict continued growth in the U.S. economy
in 1999, but at a slower rate, providing a mild stimulus to the
nation's mineral consuming industries. USGS also notes that for
the first time, the U.S. is now a net exporter of gold and
silver. They believe that there is as much gold and silver, and
other hard rock minerals undiscovered as already extracted.
So it is of concern to learn, as those new to this issue
do, that the individuals and corporations producing hard rock
minerals located on and extracted from public lands do not pay
a production fee or royalty to the United States. This is
unlike all other resources taken from public lands. For
example, oil, gas, and coal industries operating on public
lands pay a 12.5 percent royalty on gross income of the
operation. In addition, Indian tribes charge a royalty on all
types of mining, including hardrock mining. In 1990, the
average royalty paid to Indian tribes by copper mines was 13
percent. In the private sector, gold royalties range from five
to 18 percent.
A number of colleagues, including Rep. George Miller and
Rep. Nick Rahall, have advocated changing this situation for
many years. Again this year, with the support of many Members
of the House, they have introduced legislation to reform the
archaic 1872 Mining Law. We respectfully request, on their
behalf, that beyond this oversight hearing, the Chair schedule
at least one legislative hearing this year to take testimony on
these bills.
Mrs. Cubin. Thank you, Mr. Underwood. I have a couple of
things I have to say. First of all, Bill told me that I said
President Clinton made that statement about mining. Forgive me.
I'm sure you can tell by the time it was over, it was President
Lincoln who made that remark, and it's not funny.
Mr. Underwood. They are often confused.
[Laughter.]
Mrs. Cubin. Not easily. Another thing that I'd like to say
is that in the 104th Congress, we did pass mining law reform--
the mining law of 1872--and it did include a 5 percent net
royalty payment. The President did veto that--President
Clinton, not President Abraham Lincoln, but President Clinton
vetoed that. So, I think it's only fair to say that there is
bipartisan desire to reform the law, but not in a way that
makes it more difficult for an already struggling industry to
try to make a living for all of the miners.
And now, I would like to welcome Congressman Walden from
Oregon to his first Subcommittee hearing, and Congressman
Gibbons, who I say has lived the life of every boy's dream. The
only thing he hasn't been is a fireman--and he's going to do
that next he says--he's been a fighter pilot, a lawyer, a
geologist, now a Congressman, and pretty soon, a fireman. So
welcome.
Do either of you have any opening statements? Congressman
Gibbons.
STATEMENT OF HON. JIM GIBBONS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEVADA
Mr. Gibbons. Thank you, Madam Chairman, and I want to take
just a brief moment to applaud you on your leadership on the
issue of holding these oversight hearings to hear about the
state of mining in our country today. I believe that mining is
one of those industries which we have to protect, not
devastate. It's not an industry that we can control the
commodity price of the market materials that they produce, and
as a result, for those who believe that we should bury the
industry with enormous burdens of new taxes--they do pay taxes
already on a number of things--we have to be very cautious on
our approach to the industry, how it is looked after and
preserved. After all, it is the only industry that allows us to
have the quality of life that we have enjoyed through these
many years.
Madam Chairman, we've seen an exodus of mining companies
from my State. We've seen an exodus of mining jobs--high-
paying, high-quality mining jobs--that provide men and women in
the State of Nevada a wonderful living--allowing them not just
to have a home, but to provide for their children; to provide
for an education and a college education for their children.
I am one of those who has had the experience of being from
the mining industry. I can tell you that there are a number of
challenges before us. The mining industry has stepped to the
plate many, many times in an effort to address these issues,
and will continue to do so.
In my State, the mining industry is what we would like to
call ``a good neighbor.'' It allows, not just for the
development of the resource, but for communities of families to
have a job and to live in a community in a better state of life
than they ever had a chance or ever thought possible before.
I am interested to hear from our witnesses today, Madam
Chairman, about the state of the mining industry in our Nation;
and I look forward to your leadership in this role. Thank you
very much.
Mrs. Cubin. Thank you Mr. Gibbons.
I'd like to welcome Congressman Inslee to the hearing as
well. Again, it is his first Subcommittee hearing and you're
welcome to give any opening remarks, if you care to.
Mr. Inslee. I will do some powerful listening, Madam Chair.
Thank you.
Mrs. Cubin. That is always good. I need to do it more often
myself.
Well, now I will introduce our first panel of witnesses:
General Richard L. Lawson, president of the National Mining
Association; Mr. Michael J. McKinley, Minerals Information
Team, U.S. Geological Survey; and Steve d'Esposito, president
of the Mineral Policy Center. If you would come to the table,
and we look forward to hearing your testimony.
Thank you very much. First, I would like the Committee to
hear from General Lawson.
STATEMENT OF RICHARD L. LAWSON, PRESIDENT, NATIONAL MINING
ASSOCIATION
Mr. Lawson. Chairperson Cubin, members of the Committee, I
am Richard L. Lawson, the president of the National Mining
Association. Our members are the enterprises that deliver to
public use most of the basic material resources required to
uphold and strengthen America in daily life--the miners and
producers of coal, metals, and useful minerals; and the
manufacturers of their equipment, and the suppliers of goods
and services. Your oversight is timely and welcome.
Our Nation has the world's largest and most useful
combination of metal ores, minerals, and energy. We rank first
or second in the world production of about 20 essential
resources, and high in many more. We hold significant shares of
world reserves, and in world markets our presence ensures free
competition, imparts stability, and deters attempted
cartelization for either economic extortion or political
coercion.
Many resources in the West are on the Federal land
customarily called ``public land,'' a term that emerging
practices belie. Public land alone contains more resources in
variety and volume than major groupings of other nations; that
is, the European Union and Japan. Our resources give us
flexibility of national policy--national economic policy and
national security policy.
Yet the administration is in multiple ways, in multiple
venues, locking these public resources away from public use--
doing so by direct action and by indirect action. It is doing
all things possible to discourage exploration and to prevent
development. Many acts are unauthorized by current law or
unjustified by the facts. The proximity of Federal holdings has
been used to quash by intimidation private activity on private
property as well.
This month, the administration put off-limits a big block
of so-called ``public land'' in Montana. It is the most recent
of almost half a dozen executive or regulatory confiscations.
Also this month, another major metals company closed its
last U.S. exploration office. Exploration budgets are down 50
percent across the industry. No exploration now means no
production in the future. Mining companies must have something
to mine. Arbitrary delays and related risk hamper financing.
They must go where they are allowed to produce minerals.
This pattern of action is forcing America's mining industry
overseas to volatile regions and countries that have yet to
evolve stable political and economic institutions; that are not
necessarily devoted to free market economics and trade, and
that may harbor or discover, economic and political ambitions.
These acts are also forcing U.S. dependence for essential
resources on these places as well.
Some say they don't care if mining leaves the United
States, that it doesn't matter in this new age. They think that
a future can be secured without basic material resources. They
think that if they produce words and ideas in this information
age, then nothing else is necessary.
I know otherwise--that essential remains essential. I know
that when anything threatens to destabilize the world
economically or politically, America's young soldiers, sailors,
and aircrews will be sent into harm's way to make it secure. I
had to issue such orders as the Commander of U.S. Forces in
Europe, and you know it, too.
I care that the United States remains a major mining
Nation, and it has nothing to do with my present employment. I
care because my pilot son in the Air Force will be one of those
first called upon to secure the source of something essential.
If we withdraw from world markets, then he, and many thousands
of our sons and daughters who will go with him will be at risk.
U.S. mining is an element of national security. And the
policy questions are these: Do we produce these resources,
which we have at home, and keep our sons and daughters at home
as well? Or do we send the activity, and our sons and daughters
overseas?
To envision the importance of mining to America, do just
four things whenever you ride the subway to and from the
Capitol:
Never forget that the rails, the wheels, the cars, the
electric power that turns the wheels, that moves the
cars on the rails, and the control system that
coordinates everything--all of it began in a mine;
Remember that every American in the year 1998 required
almost 47,000 pounds of new mined material that year;
Remember that almost every material thing you use at
work and at leisure began in a mine, or required
something from a mine to make it, or grow it, or
process it;
Remember that the Federal taxes due directly and
indirectly to mining typically equal now more than 3
percent of all revenue--all Federal revenue--greater
than the sum of taxes on alcohol, tobacco, and other
excise items put together.
And always look up at the walls around the Rayburn boarding
platform--look whether coming or going. Recall that on those
walls are representations of history's foremost exponents of
wisdom and law; and that Moses, the lawgiver, is one of those
that has a central place. When he spoke to the people of the
Promised Land, the scriptures say he told of, and I quote: ``.
. . a land whose stones are iron, and out of whose hills, thou
may dig brass. A land wherein thou shalt not lack anything.''
America is such a land. Let us determine to keep it so.
Thank you.
[The prepared statement of Mr. Lawson may be found at the
end of the hearing.]
Mrs. Cubin. Thank you, General Lawson.
I'd also like to welcome Delegate Eni Faleomavaega to his
first Subcommittee hearing as well.
Now, I'd like to recognize Mr. Michael J. McKinley,
Minerals Information Team of the U.S. Geological Survey. I just
have to say something first. My grandfather's brother was
Oliver Otis Howard, who was one of the people who was
instrumental in starting the USGS. There's a book written about
him, and I'm going to have to get it, to find out for sure,
because people have been arguing with me whether or not he was
really one of the main guys, and I think he was.
Anyway, so, I'd like to recognize then, Mr. McKinley.
STATEMENT OF MICHAEL J. McKINLEY, MINERALS INFORMATION TEAM,
U.S. GEOLOGICAL SURVEY
Mr. McKinley. Thank you, Ma'am. Madam Chairman and members,
I am Michael J. McKinley, a physical scientist with the U.S.
Geological Survey, currently serving as the Chief of the Metals
Section in the Minerals Information Team. I appreciate the
opportunity to appear before you to discuss the role of
metallic minerals in our national security and comment briefly
on the availability of metallic minerals on public lands.
Metallic minerals are a key component of the supply of
materials essential to our national security. These minerals
are considered to be strategic and critical when the Nation
must rely on importing them. Few countries produce them, and
their use is critical to military and industrial applications.
Despite the dramatic changes in military readiness strategies
in present years, the uses of these metallic minerals are still
critical and most sources of supply are unchanged.
For example, chromium is a metal that is used in stainless
steel and in alloys in high performance aircraft. There is no
substitute for chromium in either of these applications.
However, 95 percent of the world's identified resources of
chromium, which is extracted from chromite ore, are located in
South Africa. The United States has no chromite ore reserves
and only limited occurrences of chromite ore at all. As a
Nation, we import 80 percent of the chromium we use; the
remaining 20 percent is acquired through recycling. Although
uses of chromium have changed over time, the supply of chromium
has been a major concern since World War I.
For many years, the U.S. Government has maintained
stockpiles of strategic and critical minerals. However, as the
Department of Defense has changed its primary war planning
scenarios; strategies for maintaining an adequate supply of
minerals have also changed. There were more than 80 materials
identified in the Strategic and Critical Minerals Stock Piling
Act of 1939, half of which are metals. Congress has authorized
the sale of many of these stockpiled materials in response to
changing strategies.
Only three commodities have been designated by the
Department of Defense to be stockpiled for future use:
beryllium, a very light metal used in aircraft alloys; mica, an
excellent insulator used in radar applications with extreme
high voltage, and quartz crystals, used as a filter in
electronics devices. Whether or not they are stockpiled, most
of these materials are still strategic and critical, because
they are still necessary for the equipment with which we defend
ourselves in wartime and other emergencies. For example, of the
more than 12 strategic and critical minerals used in modern
fighter aircraft jet engines, only four are commercially
recoverable via domestic sources.
At present, there are 141 active metal mines, not including
placer mines, in 16 States. Also, current U.S. laws permit
location of mining claims on Federal lands in 19 States.
The USGS has a long history of assessing the potential for
undiscovered mineral resources. Modern systematic efforts to
determine the potential for undiscovered resources, especially
metallic mineral deposits, began in the early 1960's. In the
early years of this effort, the products were qualitative,
describing high, moderate, or low potential for occurrence of
undiscovered mineral resources. More recently, probablistic
quantitative assessments have been developed, resulting in
reports that describe the probability of occurrence of
identified quantities of specific mineral commodities.
Mineral resource assessments have expanded over time to
address the needs of numerous Federal land and resource
planning efforts. The USGS, in coordination with the Bureau of
Land Management and the Forest Service, under a Memorandum of
Agreement, is conducting mineral resource assessments on
individual land units, managed by the BLM and the Forest
Service. Also, USGS is just completing a nationwide assessment
of potential for undiscovered occurrences of gold, silver,
copper, lead, and zinc. This national assessment estimates that
about as much of these metals remains to be discovered as has
already been discovered.
Although many local-scale mineral resource assessments have
been completed, or are in progress for BLM and the Forest
Service, there is no national systematic assessment of the
potential for metallic mineral resources on all Federal lands.
Some of the factors that make such an estimate difficult
include the dynamic nature of land status, with lands passing
from public to private ownership, and vice versa;
methodological difficulties that arise from the relatively
small areas included in individual tracts of public land; the
inadequacy of scientific data for making predictions in those
small areas, and the inherent uncertainties in making
probablistic assessments.
The public lands may contain undiscovered deposits of
mineral commodities that could be used to ensure the national
security. However, ultimately, geologic factors, rather than
land ownership, are the most effective predictors of potential
for undiscovered mineral resources. For some commodities, such
as chromite or bauxite ore, there is very little likelihood of
ever identifying commercially significant resources in the
United States.
Thank you, Madam Chairman. I will be pleased to respond to
any questions you may have.
[The prepared statement of Mr. McKinley may be found at the
end of the hearing.]
Mrs. Cubin. Thank you, Mr. McKinley.
Next, I would like to recognize Mr. Stephen d'Esposito,
president of the Mineral Policy Center.
STATEMENT OF STEPHEN d'ESPOSITO, PRESIDENT, MINERAL POLICY
CENTER
Mr. d'Esposito. Thank you, Chairman Cubin. Members of the
Subcommittee, good afternoon. I am the president of Mineral
Policy Center. I come here on behalf of our members and
citizens all across the country, concerned about the
environmental, social, and economic impacts of mining.
Let me summarize some of the key economic facts related to
mining as far as we see it. First, the United States is among
the world's leading producers of many metals, including gold,
copper, and silver. It has substantial domestic reserves.
Second, changes in mineral exploration and development
trends have causes that are multiple and complex. They include
ore grade metal prices, government's stability, access to land,
and available infrastructure.
Third, while mineral development is flat or down in some
parts of the U.S., this is not necessarily due to shortage of
supply or environmental protection measures. Changes in metal
prices are the most important factor.
Fourth, unstable and depressed mineral and commodity
prices, as well as increased mechanization, are reducing
employment in mining.
And, sixth, changes in the prices of metals will have
vastly different impacts on each metal-producing country,
region, and company. Some companies with low-cost operations,
may benefit during this period. Some may pursue a strategy of
buying other companies and projects rather than investing money
in exploration.
We should also not consider that drops in metal prices, and
decreases in metals exploration, are not inherently bad for the
United States or bad for the economy. For example, more
recycling of metals would be good news for the environment,
good news for the recycling industry, and good news in terms of
preserving public lands.
We do not believe that, when it comes to our public lands,
the best economic option is extraction first. There is a strong
and growing volume of evidence that the development of non-
extractive industries is in our national interest, particularly
on public lands.
Consider some of the following expert conclusions: Intact
natural resources are increasingly coming to be seen as an
economic asset. Counties with open space now rank among the
fastest growing. It is no longer accepted as obvious, the
widespread assumption that mining can be expected to lead to
economic improvement for rural communities.
Today's public lands policies run contrary to good
economics, environmental protection, and common sense. We have
singled out mining companies operating on public lands for what
amount to multi-million dollar corporate welfare payments.
Hardrock mineral producers claim that paying for Federal
minerals would force a significant portion of them out of
business. It won't. They pay royalties on State and private
lands and on other Federal lands.
Hardrock miners claim that they are somehow fundamentally
different than other sectors of the industry. They are not,
according to the U.S. Office of Technology Assessment. Hardrock
mining interests argue they should not pay royalties on public
lands because they already pay Federal taxes. This is a
misleading argument. Most businesses pay taxes. Paying taxes is
not an argument for getting free raw materials.
Inaction is also creating a sizable taxpayer and
environmental dent in our public lands. At some points, this
bill will come due from yesterday's, today's and tomorrow's
abandoned mines. Our estimate is that the cleanup cost could be
as much as $72 billion.
We should remember that cleaning up abandoned mines will
create jobs. In our view, sound economics and sound economic
policy dictates change. First, it is in our interest to take
action that will stimulate other commercial and non-commercial
uses of public lands.
Although mining will continue to be an important element of
our economy, there are clearly economic, environmental, and
social benefits derived from other industries and other uses of
our public lands, some of which outweigh the benefits of
mining. The time is now for Congress to change current U.S.
policies that favor mining on public lands.
Second, a mining industry that is rewarded for its
environmental performance, and penalized for its environmental
mistakes, will be a healthier industry, both in the U.S. and
around the world. It is in the interest of Congress to create
incentives for better environmental performance in our public
lands.
Third, more and more experts are concluding that our
environmental economic health and our security will improve if
we use Federal raw materials more wisely. We should use fewer
resources, use them differently, generate less waste, recycle,
and re-use more. Policies that benefit extraction should be
turned on their head.
Fourth, there is no justification, economic or otherwise,
for policies that provide public subsidies to mining companies,
creating an incentive for inefficient mine operations on public
lands.
Fifth, as a matter of good economics and environmental
protection, and in order to build stronger local economies and
create jobs, we should begin today to address the liability
time-bomb that is ticking away at our public, State, and public
lands. We should begin a national cleanup program for the
hundreds of thousands of abandoned mines.
We believe good environmental policy also makes good
economic policy. Profitable mining and environmental protection
are compatible. We recommend the following: Permanently end
public land giveaways to mining companies; impose a fair
royalty for mining on public lands; create an abandoned mine
cleanup program, and end the policy of giving mining companies
first use of our public lands.
These steps make economic sense. They will lead to
healthier community use and healthier ecosystems. Jobs will be
created, and we believe will lead to a healthier mining
industry.
I would like to close with a quote from the CEO of Placer
Dome, John Willson. He said: ``We at Placer Dome have concluded
that, if a mine cannot afford the full cost of the state-of-
the-art systems, then it should not be developed. There is no
tradeoff. No mine developer has the right to impose on an
ecosystem damage from acid rock drainage, just for the sake of
economic activity, returns to investors, jobs, and other
benefits. The key message here is that there is no room for
compromise in environmental protection.''
My prediction, that if Placer Dome lives by these rules,
they will in fact become the world's gold leader, and remain so
for a long time. Thank you.
[The prepared statement of Mr. d'Esposito may be found at
the end of the hearing.]
Mrs. Cubin. Thank you, Mr. d'Esposito. I will begin the
questioning. As we have five minutes to question you. Our
questions and answers have to be in five minutes, so we will
both try to make them as brief as we can, I hope.
I want to ask, first of all, Mr. McKinley, am I mistaken,
it was my understanding, or it is my understanding, that there
were potential chromite resources in Montana, but that there
are certain technological advances that need to be overcome--
some metallurgical problems, and reduction in production costs.
But, that is not necessarily a great impediment, if other
costs, like access to the land, and so on, were available, too.
Is that correct, or am I mistaken in that? Because I know that
your testimony said the only chromite was in South Africa.
Mr. McKinley. Right. What we're talking about for bauxite
and chromite is that the resources are not economically
recoverable in the United States, and the grades of chromite
and bauxite ores in the United States are of such low quality
that we can probably continue to import them economically for
the foreseeable future rather than to mine them domestically.
In the case of chromite, we are talking about the deposit in
Montana, at the Stillwater Complex. We just don't have the
facilities, in the United States, to mine that, and beneficiate
it, and smelt it and refine it effectively, without a concerted
program, which would probably take several years, according to
our specialist.
Mrs. Cubin. Right. Might be like foreign countries
developing sodium bicarbonate synthetically as opposed to the
cheap trona in southwestern Wyoming. General Lawson, did you
have----
Mr. Lawson. We have been working with the Department of
Energy for the past two years on an issue called ``Industry of
the Future.'' And this particular issue is one of the areas
that we have identified. What we are doing is laying out a
roadmap of required technologies to enhance the safety, the
environmental capability of recovery, along with the recovery
of minerals from substandard ores, in an economic fashion.
Mrs. Cubin. Thank you. Would any of you disagree with me
when I say that mining creates wealth in the economy, and jobs
in the service sector--and I want to clean up the abandoned
mines--the $72 billion, I think that number is in question.
But, those jobs do not create wealth, and in order to create
wealth, we need to have production of our natural resources.
Would anybody disagree with that? Economically?
Then, there was one thing that I wanted to point out, that
the mining law provisions that were passed by the 104th
Congress, that were vetoed by President Clinton, did provide
for, as I said, a 5 percent net royalty, and that money was to
be dedicated to abandoned mines reclamation. I would like your
opinion, General Lawson, and Mr. d'Esposito, on the effect that
that veto has had on the environment, and on the industry.
Mr. Lawson. Well, the veto simply delayed responsible
activity on the part of many. In the interim time, in order to
be ready, the National Mining Association and the Western
Governors have sat down and developed an extensive program on,
first, the identification and the compilation of abandoned
mines, of the appropriate technologies that are going to be
necessary to accommodate that. We have identified and worked on
three mines to date in the recovery process. We believe now,
from these first stages of our efforts with the governors, that
the numbers have been overstated, and perhaps, with new
technologies, the fiscal requirements have as well. But,
certainly, all of the things that could have been accomplished
during the past two years with an effective reform of the 1872
law have been delayed.
Mr. d'Esposito. Yes, a few points to the answer: The first
is that our estimate of $72 billion, which is a range of 32 to
72, is an estimate, that hopefully will prove wrong. We think
what is critical is that we start the cleanup process, most
importantly, putting resources into that process. I think
voluntary efforts are wonderful. I think the efforts of the
National Mining Association and the Western Governors
Association are steps in the right direction, but the bottom
line is, there needs to be funding to make it happen.
I think that the issue in terms of the 104th Congress
wasn't so much one of the mine cleanup, but what a fair royalty
return was. I think that is where things fell apart, as far as
I understand it. But, I do think that the sooner we get funded
cleanups, the better.
Mrs. Cubin. One last very quick question: What are--all
three of you--what are your feelings about having the Federal
Government establish the standards and levels for cleanup and
then allowing the States to accomplish those goals in the most
economically-efficient and in the least amount of time? Just
down the line, if you all three would do that.
Mr. Lawson. I think it is absolutely critical that the
States and the local areas have the maximum authority to
develop the processes, procedures, and practices, because all
these are different.
Mr. McKinley. Ma'am, I don't know that I am in a good
position to say what I think about the policy of this country.
I would have to defer to the Office of the Secretary or the
EPA.
Mrs. Cubin. I understand.
Mr. d'Esposito. We believe that the standard should be set
federally. Monies should be collected federally, deposited into
a Federal fund for cleanup, and then the monies should be
allocated to the States. So, in principle, I agree in what you
are saying. Of course, as always, the devil is in the details.
But, I think, in principle, that would work as a Federal
program carried out State by State.
Mrs. Cubin. Thank you very much, and now I would like to
yield to our Ranking Member, Mr. Underwood.
Mr. Underwood. Thank you very much, Madam Chairwoman.
Mr. d'Esposito, going back to the 5 percent royalty that
was raised in the 104th Congress, was that satisfactory to your
organization? Was that something that was consistent with your
thinking?
Mr. d'Esposito. I believe that the royalty that is being
discussed was what is called a ``5 percent net proceeds
royalty.'' That means that not only does the process of
developing the ore into a bar of gold get deducted before the
royalty is applied, but many other costs as well, and our
concern is that as you add up those costs, the royalty starts
to disappear, No. 1. And, No. 2, it is really difficult to
track all those calculations and deductions. So, that was our
concern with what was called the ``5 percent net proceeds
royalty.'' We have always pushed for a gross or what is called
a ``net smelter,'' because it is easier to calculate, it is
more transparent, and you can know what you are going to get.
Mr. Underwood. Do you have an estimate as to how much the 5
percent net royalty would have raised?
Mr. d'Esposito. I don't off the top of my head, but I can
very quickly get that number for you and compare the two. I
just don't have it at my fingertips. It was a difference in
hundreds of millions of dollars between the two types of
calculation.
Mr. Underwood. I think CBO estimated it at $11 million.
[Laughter.]
Mr. d'Esposito. For the 5 percent net proceeds.
Mr. Underwood. I am very interested in both the
presentations made by Mr. Lawson and Mr. McKinley on the issue
of strategic minerals, so that I understand its relationship to
national security. Perhaps, Mr. Lawson, you can tell us, I
understand the concept that certain minerals are important to
national security. Is there any sense on your part that current
mining policy of the United States threatens in any way our
national security?
Mr. Lawson. I think it is quite clear when you have 50
percent of the industry that no longer explores in the United
States, and a major company such as Asarco shuts its final
exploration doors in the United States, the mining industry
will be moving offshore because of the varied problems that are
associated with developing a mine in the United States. As that
industry moves offshore, the strategic minerals are going to
have to come from someplace else and that will, I assure you,
directly influence military activities in the years to come. I
spent six months a year for five years on your island and
national security was involved. Some of the national security
in that area had to do with the requirement of strategic
minerals and energy.
Mr. Faleomavaega. Mr. McKinley, in your testimony, you
stated that the Department of Defense has changed its policy
over the years and has designated some elements or some
minerals as not quite being necessary for strategic
stockpiling. Is that correct? Are all these minerals necessary?
I noticed that in General Lawson's testimony there were a
number of minerals that were stated as important for national
security. Would you care to comment on that Mr. McKinley?
Mr. McKinley. Yes, sir. As I mentioned, in the 1939 Stock
Piling Act, which has essentially remained the same for the
type of materials that are in the stockpile, there are about 80
of these materials that were designated as strategic and
critical. As of right now, the Department of Defense has said
that we only need to stockpile three materials. It does not
necessarily mean that the rest of the materials are not
strategic and critical.
For example, manganese is listed as one of the materials in
there. We have 100 percent import reliance on manganese. There
is no substitute for manganese and we absolutely need it for
steel. The same could be said for cobalt. We have almost 100
percent import reliance on cobalt. It comes from countries that
have geopolitical problems. Cobalt is needed for superalloys
and for high velocity armor piercing projectiles.
What I am trying to say is even though the Department of
Defense has only designated three materials to be stockpiled,
the other materials, for the most part, are still strategic and
critical.
Mr. Faleomavaega. Thank you very much for that
clarification.
General Lawson, in your testimony, you referred to the
concept of so-called public lands. Perhaps you can explain to
me what is the difference between real public land and so-
called public land.
Mr. Lawson. What I thought a real public land meant was
that it is available for multiple use in the various ways that
the original laws and descriptions of public lands were
intended. In the past six months, we have lost almost 2 million
acres to various executive orders which had nothing to do with
any action on the part of the legislature, which didn't have
any scientific justification that we were aware of, and which
were withdrawn from total public use. These lands have been
completely withdrawn from any use, not just mining: no timber,
no grazing, no snowmobiling, no anything; and so I just suggest
to all of you that we need to think: Are public lands really
public anymore? Is there a move afoot to totally remove and
fence up public lands and not make them available for any
activity?
Mr. Faleomavaega. Thank you very much.
Mrs. Cubin. Mr. Gibbons.
Mr. Gibbons. Thank you very much, Madam Chairman.
Just briefly, General Lawson, could you give us a thumbnail
sketch of the economic study that the mining association did on
the contributions of mining to the United States.
Mr. Lawson. Yes, let me just give you a summary of the
activity. We had total, direct, and combined economic activity
in the U.S. economy of $523 billion. We had direct and indirect
Federal revenues of $56 billion. We had direct or indirect
State and local revenue of $27 billion. So, it was a combined
business income over that time frame, one year of $295 billion,
which was derived from the mining industry during that year.
This particular year happened to be 1995.
If I may, let me add one thing. There has been a lot of
discussion here about greedy mining companies receiving
corporate welfare. In the year 1997 and this comes from the
World Almanac of this year, 1999, the mining industry's total
profits from the primary metals industries were $5.6 billion.
The communications industry had a profit of $31 billion, and
the electronic equipment industry had a profit of $25 billion.
One questions: how did we get to be called the rich greedy
industry with that set of numbers?
Mr. Gibbons. Thank you very much.
Mr. d'Esposito, I have read your testimony. In fact, as I
read most of it, I thought it was deja vu 1950 because as you
heard the General talk about the mining requirements of every
individual in this country requiring 44 thousand pounds of new
material mined every year, I am caught by your statement that
all materials should be recycled and reprocessed. I think it is
evident from my knowledge that mining in this country only has
disturbed one quarter of 1 percent of the land in this nation.
In fact, that is less land than is disturbed by paved parking
lots in Safeway stores.
I want to turn to your testimony here and, of course, I
want to talk about the ticking liability time bomb that you
talk about here and you quoted or referenced Leo Drozdoff of
the Nevada Bureau of Mining Reclamation. He says that at least
13 major mines in Nevada are currently in bankruptcy. Is that
an accurate statement of Leo Drozdoff?
Mr. d'Esposito. That statement was conveyed to me by
somebody who spoke directly with----
Mr. Gibbons. Is it accurate because you are representing it
as accurate here? That's my question.
Mr. d'Esposito. The statement is accurate as it was
conveyed at a meeting about three weeks ago.
Mr. Gibbons. Well, my understanding is that these
operations are not major, but that really doesn't matter but
would you just tell us the hazards to the environment or public
health and safety that bankruptcy per se causes?
Mr. d'Esposito. Bankruptcy, if there is not adequate
bonding and reclamation as we have seen in places like Zortman-
Landusky, potentially places like Summitville mean that
adequate cleanup is not done.
Mr.Gibbons. Is there adequate bonding in the State of
Nevada?
Mr. d'Esposito. Is there adequate bonding in the State of
Nevada?
Mr. Gibbons. Yes.
Mr. d'Esposito. Nevada has bonding regulations.
Mr. Gibbons. Is it true that every one of those mines that
you describe here is bonded under reclamation?
Mr. d'Esposito. I would expect that's the case but the
point of including them isn't to say each mine will in fact end
up being a taxpayer problem or an environmental problem. The
point is to say quite a few are in the situation.
Mr. Gibbons. We are talking about Nevada because that is
your statement to this Committee which theoretically is under
oath and you are representing that these mines in the State of
Nevada represent a ticking public liability time bomb and each
one of these mines is covered by bonding in the State of
Nevada. Now are you saying the State of Nevada has inadequate
revenues to cover the bonding of these mines?
Mr. d'Espositio. I am saying that a ticking time bomb
exists when you have things like Summitville, followed by
Zortman-Landvsky, followed by other mines on public lands that
don't have adequate bonding.
Mr. Gibbons. Well, $67 million for Zortman-Landvsky is not
inadequate bonding. Is it not?
Mr. d'Esposito. State regulators in Montana have said that
the bonds may be short as much as $8 million. We estimate it
could be higher. Time will tell. That is a significant amount
of money to taxpayers in Montana.
Mr. Gibbons. Madam Chairman, my time is about up and I will
yield back to you for later questioning
Mrs. Cubin. Thank you, Mr. Gibbons.
I want to make a point before I yield to Mr. Faleomavaega.
I brought up earlier the issue of mining, creating, and
developing the resources actually creating wealth. I think the
point that I failed to make was that we can't protect the
environment if we don't adequately develop and we don't have
wealth. So, I think the two things have to go hand in hand. The
other thing we talked about is the 5 percent net proceeds and
the $11 million that the CBO estimated would be generated by a
5 percent net proceeds in the bill that the President vetoed.
Nevada has done a very good job of calculating 5 percent
net proceeds levy on mines for about a century, and the State
collected $48 million in 1994 alone. So I think that is what
happened to these figures, and I think projections can be
questioned and I think somehow we have to all come to an
agreement on how we are going to do this because I know we all
want the same thing.
Mr. Faleomavaega.
Mr. Faleomavaega. Thank you Madam Chairman. Just a couple
of questions.
To the members of the panel: Do we currently have an
accurate assessment from the U.S. Geological Survey and from
the mining industry in terms of the total value of the metals
that we currently have in the United States? Not what is
already been harvested or mined, but do we have an accurate
assessment both from the U.S. Geological Survey and the mining
industry of the dollar value of the mines or the metals that
are currently in the United States?
Mr. Lawson. The U.S. Geological Survey does have a pretty
good handle on the value of how much was produced. Now you said
you were not interested in that, but we do not have, I would
say, a good handle on what has yet to be produced.
Mr. Faleomavaega. I believe there is a statement in your
written testimony, General Lawson, you state that the value of
the coal that is currently in the United States was more than
all of the oil that Saudi Arabia, Iraq, and Kuwait have in
their possession. Now how did we come about with that
assessment?
Mr. Lawson Well, that assessment is based upon coal that
has already been researched out, found and explored. We know
precisely what the reserves consist of in terms of both
quantity and quality, and we know for a fact that they
represent both an energy context and total value and that was
just a comparison with oil and gas in the area, sir.
Mr. Faleomavaega. So, that is an accurate statement?
Mr. Lawson. Yes, but as to the metals, precious metals or
strategic metals, we have not made an accurate assessment.
Except of those reserves that have been found and located to
date.
Our real concern, and a concern that I think the Committee
needs to come to grips with, is because of a various number of
factors. More and more of our companies are having to give up
their exploration in this country. The costs of exploration are
not insignificant. The fact is they are part of the most
expensive aspect of the mining process and for various reasons
both in terms of cost and in terms of delays associated with
the time between the finding of the mineral and the actual
ability to begin to mine a mineral, companies are electing to
go offshore.
Mr. Faleomavaega. Do you think that might be to our
advantage in the long run? Let's extract the mineral contents
of other countries before coming back to our own. Why don't we
extract the others first before hitting up on our own
resources?
Mr. Lawson. I think from a security standpoint that has
some significant problems to say nothing of the economic
aspects of it. We have the greatest storehouse of minerals in
the world and the opportunity to effectively use those is one
of the things that has made our economy number one in the
world. We have low cost basic resources to fuel this economy of
ours; that is why it is demanding. 47 thousand pounds per
person.
Mr. Faleomavaega. My time is running short. One of the
reasons why we have not approved the United Nations Convention
of the Law of the Sea was because of these strategic metals. As
far as our policy is concerned, the treaty did not give enough
to the mining industry if we are to harvest, for example,
cobalt and manganese that is contained in these nodules that
are found in seabed mines and seabeds of many of the island
nations in the Pacific as well as the Atlantic.
Mr. Lawson. Well, the Seabed Treaty itself has several
problems but that is one of the problems that has not been
effectively resolved between the nations who are negotiating
that Treaty.
Mr. Faleomavaega. Do you think our policy is accurate that
we should not sign into the United Nations Law of the Sea
Convention?
Mr. Lawson. At this time, I think for a whole series of
reasons, we should not.
Mr. Faleomavaega. Very interesting.
One more question, Madam Chairman, if it is all right. I
think it seems that the mining industry really has had a very
bad reputation. Is it because of the media hype or is it
because of the environmental concerns and the history, strip
mining, causing a lot of pollution, and things of that sort? Is
this an accurate statement of the history of the mining
industry?
Mr. Lawson. Well, I think its 50 years old the assessment
that you made. I think we're making dramatic progress in
several ways. I like to think that Mr. d'Esposito and his group
do an enormous service to the country by being environmental
activists, by making us all take a look carefully at everything
we are doing. However, I would like to suggest that we the
people who put the blood, sweat, and tears and basic resources
into cleaning up the environment are the active
environmentalists. We are actively engaged in environmentalism.
Mr. Faleomavaega. One of the biggest problems, sir, that we
are having now is that we have a lot of our conglomerate big
mining companies doing operations in foreign countries that do
not necessarily have high standards as far as emissions and
environmental requirements as we have in our own nation, and
now some of these tribes I think from Latin America are coming
to sue some of these mining companies for some of these
environmental things they have caused in these third world
countries. Is that a fair way to do business to go and extract
the mines and minerals from these countries that have lower
standards?
Mr. Lawson. Sir, I would not accept any of the statements
you have made. Wherever we go around the world, we take with us
the same kind of laws that we have here in this country. We
help those rulers of those countries impose those laws because
we in the United States know how to comply with those laws.
It's the one way that gives us an edge on mining in other
countries around the world to differentiate us from mining
companies who come from places that haven't had to create
environmental renovation. I think we are doing it.
Mr. Faleomavaega. I submit to you, sir, that is not what is
coming forth right now General Lawson. I would like to see the
specific incident; because frankly I've been all around this
world.
There is a U.S. mining company doing business right now in
West Papua, New Guinea that has caused a lot of pollution and
all they had to do was to conform to Indonesian environmental
standards. It was not U.S. standards and there were some very
serious questions raised on that as an example. I only cite
that as an example, sir.
Mr. Lawson. I would like to see that.
Mr. Faleomavaega. I will definitely show you because it
made the first page of The Wall Street Journal and I'll share
that you with you, surely.
Mrs. Cubin. I'd like to thank our panel for their testimony
and for their candid answers to our questions.
Now I'd like to introduce the second panel. Mr. Doug Silver
of Balfour Holdings, Inc.; Dr. David W. Menzie, Minerals
Information Team of the U.S. Geological Survey, and Dr. Donald
Brobst, Society of Economic Geologists.
I would like to remind the witnesses that under our
Committee rules, we would like you to limit your testimony to
five minutes but your entire written testimony will be
submitted into the record.
The Chair now recognizes Mr. Doug Silver.
STATEMENT OF DOUGLAS SILVER, BALFOUR HOLDINGS, INC.
Mr. Silver. Thank you. My name is Doug Silver. I am a
research scientist and owner of Balfour Holdings. We serve as a
corporate planning organization for many of the mining
companies around the world. I was asked to speak today about
exploration issues as they relate to the U.S. mining industry
and I'm just going to read my comments.
There has been a dramatic decline in exploration activity
in the United States over the past five years for two principal
reasons. The depressed metal prices are responsible for general
worldwide contraction in exploration expenditures. For
instance, U.S. companies have reduced their worldwide
exploration by 40 to 50 percent just in the last year and based
on where the metal prices are today, we see that as being
further cut during the year. The inefficiencies of the United
States Federal and State governments in issuing permits
compounds the difficulties companies are experiencing when
trying to operate in the United States. The United States is no
longer considered competitive for mineral exploration despite
its strong geological potential for mineral discoveries.
Interviews with many exploration companies for this
testimony reflect the consensus of opinion that the Federal and
most State governments are trying to phase out the mining
industry by catering to the whims of small groups such as the
Mineral Policy Center whose deft manipulation of the legal
system allow them to indefinitely delay the permitting process
by financially breaking the companies. The single largest
concern is the regulatory bodies directly or indirectly
mismanaging the permitting process. The delays and substantial
cost overruns, which are now commonplace, create undue
financial hardship on mining companies and extort their legal
rights. Companies cannot operate in such a hostile climate so
they are taking their capital, ideas and U.S. environmental
practices to other pro-mining countries. The possible
exceptions to this opinion, of course, would be Nevada and
Alaska where the State governments have been very proactive in
both developing mining and in protecting their rights.
Only a handful of U.S. base and precious metal projects are
currently undergoing the need for the required EIS or EA
process. Mr. Faleomavaega, in response to your question, there
are about 650 gold deposits in the United States and probably
several dozen base metal deposits, most of which are either
inactive due to low metal prices or the inability of companies
to financially survive the permitting process. As Mr. Babbitt
continues his successful circumvention on the legislative
branch, some of these deposits will never be developed while
others will never be discovered. The permitting process was
never intended to be an adversarial process but that's what it
has become and it really needs to return to its original roots
as a cooperative effort between industry and government. A more
streamlined system should be created which should study
contents, establish time frames and define how costs are
established and maintained.
I have heard countless horror stories of companies who hire
the best consultants and work with the government to establish
what it would cost in terms of time and money to complete the
regulatory requirements and now the government has spent two to
three times that amount and the process still has not been
completed. Accountability is the biggest shortcoming of the
process right now. We are finding that individuals within
government bodies appear to be able to interject their personal
agendas into the process. We see no oversight, we see no sense
of urgency by the regulatory groups to do a certain number of
studies. It is an endless process of draining the cash out of
companies and preventing mining. Finally, the Record of
Decision which is supposed to be the culmination of all the
science and ideas brought together is now being deferred to the
non-governmental groups who seem to be able to delay, appeal,
and do whatever they want at the companies expenses. You are
supposedly meeting to talk about proposed changes to the Mining
Law of 1872. However, this debate, in my opinion, is becoming
moot because of all these other problems. The mining industry
would like to contribute to the U.S. economy but without a
sincere effort to create a level playing field, companies can
no longer justify spending money in this country.
There is an important ramification, simply the management
problems of the regulatory process. We're not talking about
discontinuing the EIS's. We're talking about having a system
that is organized and works in a set time frame. Fifteen years
ago you could permit a mine in two years. Now it is somewhere
on the order of 10 years. A lot of the gold mines don't even
have mine lives of 10 years and so you've created a huge
problem for industry and it's one of the reasons that people
are moving offshore. A return to higher metal prices will
provide companies with financial breathing room but it will not
do anything to alleviate the difficulties in operating in the
United States.
The government should be very concerned about the mass
exodus of U.S. mining companies because once a company spends
tens or hundreds of millions of dollars on a foreign project it
can neither move the project back to the United States nor
return the funds it spent. Instead, these companies tend to
make additional investments in the host countries. Therefore,
shifting exploration activity back to the United States would
become progressively more difficult as companies are
established elsewhere. And, working on an international level,
my clients are all sorts of companies, the United States is
basically joining the ranks of certain persona non grata in the
exploration world and it is terribly unfortunate that the legal
rights of the miners are no longer honored. Thank you.
[The prepared statement of Mr. Silver may be found at the
end of the hearing.]
Mrs. Cubin. Thank you, Mr. Silver.
STATEMENT OF DR. DAVID W. MENZIE, MINERALS INFORMATION TEAM,
U.S. GEOLOGICAL SURVEY
Dr. Menzie. Madam Chairman and members, thank you for the
opportunity to speak with you today. My name is David Menzie. I
am a geologist with the U.S. Geological Survey. I currently
serve as the Chief of the International Mineral Section of the
Mineral Information Team. In this testimony I will discuss
changes in the import and export of metallic mineral resources
from 1975 to present.
The United States plays many roles in global mineral
markets for metallic mineral commodities. USGS has analyzed the
consumption production, imports and exports over the last two
decades for 49 commodities to describe changes in imports and
exports of metallic minerals. Seven different types of changes
were identified and all commodities were grouped into one of
these seven types. The major factors that influenced these
changes are better understanding of geology, technological
change, economics, and political factors.
I refer you to Table 1 of my statement, which presents the
percent net import reliance for metallic mineral commodities
during the period of 1975 to the present and estimates U.S.
consumption for each of the commodities in 1998.
Percent net import reliance is calculated by determining
the percent of apparent consumption that is met by net imports.
It is one of the ways of examining a country's vulnerability to
supply disruptions. Time does not permit me to describe the
changes in consumption, production imports and exports for each
commodity. Instead, I will identify the seven groups of
commodities that exhibit similar patterns of imports and
exports. Details for the specific commodities are an attached
item.
Group 1 commodities show continued net exports and these
include beryllium, lithium, and molybdenum.
Group 2 commodities show changes from net imports to
exports and these are gold and silver.
Group 3 commodities show decreased import reliance. These
are cadmium, iron ore, and selenium.
Group 4 commodities show changes from net exports to
imports. These include aluminum, copper, lead, magnesium metal,
rare earths and titanium metal.
Group 5 show continued import reliance of less than 50
percent, iron and steel, mercury and vanadium fall into this
class.
Group 6 commodities show increased levels of import
reliance. Commodities in this group include antimony, silicon,
tungsten, and zinc.
Group 7 commodities show continued import reliance of
greater than 50 percent and include arsenic, bauxite, and
alumina, bismuth, cesium, chromium, cobalt, niobium, manganese,
nickel, platinum-group metals, rubidium, scandium, tantalum,
thallium, thorium, tin and yttrium.
Another useful way of examining vulnerability of our
economy to disruptions in the supply of mineral commodities is
to examine where the imports of these commodities come from and
what percentage of total imports come from those sources. Table
2 of my testimony shows the countries of origin and percent
reliance on the two largest suppliers of each of the
commodities. Some of the major changes in the geologic,
technological, economic and political factors that have
influenced the pattern shown in Table 1 include an increased
understanding of the geographical factors that control the
formation of mineral deposits. Gold is a useful example.
Since the late 1970's gold has been the primary commodity
of interest for much of the exploration community. Because much
of the research that formed the basis for the new understanding
was conducted in the western United States, the United States
has benefited more from these advances than have countries that
have different geological conditions than the U.S.
Another major change has been the development of new
technologies for exploration, mining and processing of ore.
These include but are not limited to new mining technologies
and the development of hydrometallurgical techniques for
processing gold and copper which have been extremely important.
A technological area of growing importance is industrial
ecology, the study of the flow of minerals and materials from
the source to ultimate disposal. It encompasses recycling of
materials and the reuse of product. It extends to the design of
new products in ways that will reduce the need for raw
materials or the cost of recycling. Recycling is already an
important factor for materials such as aluminum and steel.
Recycling, remanufacturing and redesign are likely to have an
increasing impact on many materials in the future.
Global, political, and economic changes have an increasing
effect on the patterns of mineral production, imports and
exports. The adoption of democratic governments and market
oriented economies throughout Southeast Asia and Latin America
has greatly changed global patterns of investment in mineral
projects. The result has been a major change in the willingness
of companies to invest in exploration and production in these
areas.
In addition, political reform and transition of the
centrally planned economies of the former Soviet Union and
Eastern Europe and China toward more market oriented economies
were also affecting patterns of mineral production, imports and
exports. The transition has resulted in decreased domestic
consumption of mineral resources in those countries and
increased exports of mineral commodities. Examples of this
include aluminum and copper from Russia.
Several changes will affect the pattern of mineral
production in the future. In the short term, the recession in
Southeast Asia has caused decreases in mineral consumption that
has depressed prices of many commodities. In the longer term,
continued development of Southeast Asia and China could
significantly increase the consumption of minerals over the
next 10 to 20 years. Thank you very much.
Mrs. Cubin. Mr. Faleomavaega.
Mr. Faleomavaega. Madam Chairman, I would like to ask
unanimous consent that these remarks and the written statement
by the gentlemen from West Virginia be made a part of the
record.
Mrs. Cubin. Without objection, so ordered.
[The prepared statement of Mr. Rahall follows:]
Statement of Hon. Nick Rahall, a Representative in Congress from the
State of West Virginia
Many years ago we had a chairman of this Subcommittee who
held hearing after hearing on the importance of minerals to the
national economy, and to the nation's security.
Some of you may remember Jim Santini and his love affair
with strategic and critical mineral issues.
So it was from that time, during my early years in the
Congress, that I began to learn about the subject matter of
today's hearing, not just from Jim, but also from our late,
great former chairman Mo Udall.
After a time, when I was chairman, it is an established
fact that this Subcommittee again held countless hearings on
hardrock mining issues, and not just in Washington, DC, but in
several locations in the West as well.
With this background, I have no doubt that hardrock mining
is an appropriate use of lands in the public domain.
I have never questioned the concept of multiple use of
those Federal lands not reserved or withdrawn for specific
purposes.
But what I have questioned is the appropriateness of a
regime in which hardrock mining is conducted on public domain
lands with virtually no return to the American public for the
use of those lands.
This practice simply defies logic, especially as we
approach the new millennium.
No company, no private individual, would allow mining on
lands they hold title to without requiring financial
compensation. And I fail to see why the Federal Government
should be the exception.
I have also questioned the appropriateness of a regime in
which the mining and reclamation aspects of hardrock mining on
Federal lands is largely regulated under a patchwork of state
environmental laws and regulations.
Even where there are Federal laws specifically for this
purpose, such as SMCRA for coal, problems arise as we have seen
in southern West Virginia with mountaintop removal mining.
One does not have to imagine, then, what types of problems
are occurring under a loosely woven quilt of state law and BLM
policy.
When all is said and done, yes, hardrock mining is
important. But so, to, is our responsibility to be good
stewards of the public domain. And so, to, is our
responsibility to those citizens who must contend with the
environmental ramifications of these operations.
I hold no pretenses that H.R. 410, my mining law reform
bill, will ever see the light of day in this Committee. Nor do
I believe it is a perfect bill. But I do believe that resisting
reform is bad business for the mining industry.
Thank you
Mrs. Cubin. I wanted to announce to the Committee that a
vote is going on--a 1-minute vote on H.R. 171, then a 5-minute
vote immediately following on H.R. 193. I think we really don't
have time to give Dr. Brobst adequate time for his testimony
before the vote so we will go vote and then we will return as
quickly as we can after that and then we will proceed with
questioning of the witnesses. I apologize for the delay.
[Recess.]
Mrs. Cubin. I may go ahead and call the Subcommittee back
to order, and recognize Dr. Brobst for his testimony.
STATEMENT OF DR. DONALD BROBST, SOCIETY OF ECONOMIC GEOLOGISTS
Dr. Brobst. Good afternoon, Madam Chairman and members of
the Subcommittee on Energy and Minerals. I am pleased to be
here to speak to you on behalf of the Society of Economic
Geologists, a 79-year-old society that now includes about 3,000
geologists who work in academia, government, and industry, but
have no formal ties to any one of these parts.
We are greatly concerned about the future availability of
the minerals and fuels that are the lifeblood of our
civilization, the basis of our economy, and our personally
comfortable lives. We look around this room and consider the
origin of the materials. We either mine them or we grow them.
Remember that it takes mineral fertilizers and soil
conditioners, as well as fuels, to grow things.
Land issues are fundamental aspects of mineral exploration
and mining. We must examine large areas of land to find new
mineral and fossil fuel deposits. Land policy opens or closes
land to exploration and mining. Land policy--that is mining
law. The Mining Act of 1872 and the Leasing Acts of 1920 and
later recognized the need for access to public lands for
exploration and mining. Since the enactment of the Wilderness
Act in 1964, land policy seems to be traveling a new path
toward tighter restriction on exploration and mining.
If closure to these activities is the wave of the future,
we must ask, why is this so? Perhaps this is an early
manifestation of anxiety about how the resources are used and
how the planet is degrading. But we must come to the
realization that through understanding and desire for change,
these things evolve. The facts must be faced realistically. We
need these resources to live on. Earth's resources are finite
and aren't evenly distributed. A minable deposit of anything is
a rare and beautiful thing.
Most of these rare and beautiful deposits will be needed--I
should say, more of them will be needed as the population grows
in the 21st century. Compound growth is a real killer for
resource consumption and population growth. Mineral deposits
are sought and mined at great risk and high cost in time and
money. We need accessible land to carry out this effort. Work
on a promising prospect may take 10 to 20 years to bring into
production, and whose life might last 10 to 20 years.
Therefore, deposits that we hope to be mining in 2010 to 2020
must be identified very soon.
A nation that cannot provide its own minerals and fuels
must buy them abroad, if it can. Problems may be created in
foreign relations. Cartels may try to limit prices, production
and distribution. Many a war has been fought over the access
and possession of resources.
Being without these commodities leads to a degradation of
the standard of living, and that may be followed by civil
unrest. We need a balanced view of the need for these
nonrenewable resources and a need for a safe, healthy
environment.
Better technology for exploration and mining is developed
constantly. This allows environmentally-safe operations and
leads to the use of formerly uneconomic materials. These
technical developments also extend the use of our finite
resources, but generally require more energy to produce.
The development of new ideas and technologies suggest that
multiple mineral assessments of land are certainly needed, as
stipulated in the wilderness legislation. As designated
assessor of these lands, the U.S. Geological Survey should be
supported in the multiple assessments of those withdrawn lands,
and the assessments should include drilling for information
about the third dimension: depth.
Mineral assessments without subsurface information are much
less valuable and reliable. By 1996, wilderness areas already
included more than 100 million acres, in 11 States of the Far
West and Alaska and mostly on the public lands under
discussion. This region has a geologic history through which
conditions were favorable for the formation of many known large
mineral and fuel deposits, and probably many more undiscovered
ones.
Would it not be a good idea to allow for future access to
these lands? Would it not be wise to get a better idea of the
mineral wealth on and under our Federal public lands before
putting them all out of commercial reach? The Nation needs land
accessible to mineral entry.
In the few minutes that I have, I have tried to highlight
some major points that I made in the statement that I submitted
to you. My written statement also contains a bibliography that
includes references cited in the statement, and also lists some
other works that focus on our mineral resource problem.
Thank you.
[The prepared statement of Mr. Brobst may be found at the
end of the hearing.]
Mrs. Cubin. I would like to thank the entire panel for
their testimony. I will begin the questioning.
First, I would like to ask Dr. Menzie, and then followed by
Dr. Brobst, if he wishes: One of the witnesses on the first
panel testified--and this is a quote from his testimony--
``Recycling should be thought of as a source of minerals.'' I
would like to ask you both, what are the recycling rates for
some of the metals that you discussed, and realistically, how
much can the recycling rate for these metals be increased?
Dr. Menzie. Madam Chairman, I don't have the recycling
rates at my fingertips, but they generally are less than 50
percent for any given metal. It varies quite considerably,
depending on the particular metal. But, in general, recycling
has increased over time, and it is largely in companies'
interests to recycle. They, therefore, do so. So the rates have
increased over time, but they don't provide more than--well,
they are all less than 50 percent of the supply.
Mrs. Cubin. Realistically, do you think that this recycling
rate could be increased by any significant level in the short
term?
Dr. Menzie. That would be beyond my expertise. You would
have to get into metallurgy and recovery. So I think you need
to talk to someone else about that.
Mrs. Cubin. Dr. Brobst, did you want to respond?
Dr. Brobst. Well, I might stick my neck out a little bit on
that. I think that one of the interesting things about
recycling is we can, undoubtedly, do more in a lot of areas.
Some years ago, I visited the Reynolds aluminum facility down
in Richmond, Virginia, and they were talking about the
recycling of beverage cans, the aluminum ones. They were saying
that they believed at that time that very close to 70 percent
of the beverage cans were being recycled, which I think sounds
phenomenally high. But you can recycle those cans, those
aluminum cans, with about 5 percent of the energy that it takes
to smelt virgin aluminum bauxite.
So there are certain things that could be done, such as a
lot of recycling education--getting people to do it. You can
tell I am old enough to have been around during World War II,
and I recall my mother recycling unused aluminum cans and that
sort of thing. So after the war, we stopped all that, but it
could really be started again.
Mrs. Cubin. Dr. Menzie, I am wondering if we could trouble
you to furnish the Committee with those recycling rates, if you
wouldn't mind?
Dr. Menzie. I would be glad to provide the recycling rates.
Mrs. Cubin. Thank you very much.
[The information may be found at the end of the hearing.]
Mrs. Cubin. This question is for Mr. Silver. I am concerned
about the trends in domestic mineral exploration spending. I
understand that U.S. exploration expenditures have been
declining steadily since 1992, whereas worldwide exploration
expenditures were increasing prior to the onset of the economic
problems in Asia. Could you elaborate for me a little on the
exploration trend since 1992?
Mr. Silver. Whenever metal prices go up, you always get an
increase in exploration expenditures because the companies can
afford it. Exploration is considered a discretionary
expenditure by most companies, or, in our language, many mining
companies view exploration as a necessary evil. Lately, with
metal prices being low, they are forgetting the word
``necessary.'' It is expensive to explore. It is very, very
high risk. It can take a very long time to do, which is very
hard for a commercial enterprise.
It has been decreasing--gold prices, in particular, have
been dropping. The other commodities are now dropping. So
people are cutting way back. In the United States, though, they
are having cutbacks because of metal prices, and since 1992, it
has dropped off considerably. This year it is down
substantially, with many companies cancelling, what we call,
generative or grassroots. That is the exploration process where
you discover new gold areas or new copper areas. You try new
technologies, new research, to find brand-new deposit types and
new areas. Most companies cannot afford to do that under
today's metal prices. So, instead, they are only exploring,
what we call, headframe exploration, which is exploration
around the existing mines. When I asked the companies why they
were focusing on that, their comment was, those lands are
already permitted, and therefore, we can justify spending the
money there.
Mrs. Cubin. I think at some point we do have to be
concerned whether sufficient expenditures for exploration are
being made to replace the mineral reserves and maintain our
Nation's domestic mineral resource base. Otherwise, our
domestic mining industry I think will slowly slip into
oblivion.
Do you think that current exploration expenditures are
adequate to replace domestic reserves at normal mining rates?
Mr. Silver. Absolutely not. As you know, the United States
has become the second largest gold producer in the world. They
are mining about 10 million ounces of gold a year. The average
gold deposit is measured on the order of several hundred
thousand ounces. So you need multiple discoveries to replace
any of the U.S. production. So not only do you have an
accelerated depletion of the existing reserves, but you are not
finding enough new deposits to replace the gold reserves being
mined. We are already in a negative curve. If you look at
exploration expenditures, you will see they have leveled out,
and what the projections are for 1999 forward, they are
definitely going to drop off, and so are the discoveries.
Mrs. Cubin. I recognize that my time has run out. Mr.
Tancredo, if you don't mind, since the dais isn't teaming with
members to ask questions, I would like to ask one more question
of Mr. Silver.
I understand that several years ago you compiled an
analysis of the effect of royalties on mining operations. Could
you summarize that for me? And would you mind submitting a copy
of that for inclusion in the record?
Mr. Silver. By all means.
[The information may be found at the end of the hearing.]
Mr. Silver. I was asked last year by the Minerals
Exploration Coalition to analyze the new proposed royalty
schemes on U.S. mines. I was really fortunate in getting one of
the mining companies to actually provide me with their actual
financial data for their three U.S. gold mines, and then we
modeled the different royalty provisions.
Mrs. Cubin. What mines were those?
Mr. Silver. It was Golden Sunlight, which is in Montana--it
is a gold mine--Cortez, which is in Nevada, and the third one
was--what is the third gold mine? There is a third one; it will
come to me. Bald Mountain, Nevada.
Mrs. Cubin. What State is that one in? If you can't
remember, it is all right.
Mr. Silver. I am drawing a blank. It was the three gold
mines that Placer Dome has in the United States.
Mrs. Cubin. Okay.
Mr. Silver. We modeled these and tested them in different
provisions. When we did this, because we looked at all the
different governmental entities and their different fees they
extract from mining operation, we lumped them together on a
dollar-per-ounce basis. Because we mine ounces, we look at our
cash costs on a per-ounce basis. We, basically, found that this
8 percent provision that was being proposed would, in fact,
increase the governmental extraction fees by 50 percent, which
we were amazed that that would be acceptable to any American,
to have their taxes raised 50 percent, but that is the way it
came out with computer modeling.
Mrs. Cubin. Thank you very much.
Mr. Tancredo, do you have questions for the panel?
Mr. Tancredo. Thank you, Madam Chairman. I do.
My attention was drawn to the same set of figures that
Madam Chairman's references were made to just a minute ago, and
only to the extent that I sometimes think that providing the
Congress with this kind of information is dangerous. As you
probably know, there are a lot of people here who would look at
this decline and take it as a very positive statistic, and
especially mineral exploration expenditures in the United
States. There are people who would certainly want to see it
decrease. I know they are in this Congress. You know that they
exist. To them, as they look at this and say, ``Boy, isn't that
great, how far we are going down,'' maybe pretty soon it will
be zero, and we won't be disturbing the environment in the
United States anymore.
At any rate, I was wondering, Mr. Silver, if you could
also--you, obviously, feel strongly about the current open-
ended EIS process. You believe it is detrimental. I certainly
agree with you.
The question is: What do you envision as an alternative to
it? Could the EPA, in your estimation, undertake something
like, what sometimes has been referred to as, the ``rocket-
docket'' process--you know, to expedite project approvals. Are
we kind of running down a slippery slope there by handing
anything over to them for that purpose?
Mr. Silver. I wouldn't pretend for a minute to be a lawyer,
even at Halloween.
[Laughter.]
When we work with companies and they have a management
problem, we can find solutions to the management problem and
let the company move ahead with a more efficient structure that
benefits the shareholders and the employees. I don't see why we
can't do that with the U.S. Government.
Having said that, I realize that anybody can sue you any
time they want, and they can appeal anything they want, but it
strikes me very odd that we spend millions of dollars and
several years conducting studies that are deemed important, and
then at the end of it, anybody who wants to appeal or obfuscate
the process is allowed to get away with it.
Mr. Tancredo. Yes.
Mr. Silver. I think that the government should set a
certain number of studies that are agreed upon with expert
consultants and with the company and the government. Those
studies should have a budget. The budget should be adhered to,
and when it is done, a record of decision should be put out,
and that should become the final say. If other groups want to
come in and appeal it after that, I think it should be the
government's responsibility to pay for that, rather than
financially bankrupting the companies.
One mining company that is extremely successful in
discovering deposits in the United States no longer explores
here. When I asked their president why, he said, ``Why would I
want to discover another deposit in this country and go
bankrupt getting a permit.''
In Bolivia, the permitting process is set up with
timeframes. You are required to submit the information in a
timely manner. They are required to review it and make
decisions. If the government does not adhere to that timeframe,
the permit is automatically issued.
This is the thing: We are taking U.S. environmental
practices all over the world, because most of these companies
are public companies. Their shareholders demand it. Their
management and their employees demand it. But in other
countries they help you through the process, and they try to
make it efficient. They set deadlines, budgets, and they keep
to it. We seem to have an open checkbook policy here, which is
just destroying us. It is very frustrating.
Mr. Tancredo. It certainly is frustrating. I am sure you
recognize, and certainly I believe that the reason why we face
this kind of a situation has little to do with the actual cost
that either the government incurs or you incur in the process.
I agree with you; I think there are ulterior--I think there are
other motives for the people who are involved to force you and
the companies that you are talking about, into the kind of
process that you have described.
The last thing I wonder is, you also mentioned that Alaska
and Nevada's policies were progressive, proactive. I guess I am
wondering, do you know, what has the EPA done about that? Have
they found out yet?
Mr. Silver. I don't think it is just the EPA. I mean, I
think it is the State governments as well and a number of other
groups. The State of Alaska understands the value of natural
resources to its economy. It is a very big part of Alaska. The
same thing with Nevada. They appreciate the role minerals play
in their economies, creating jobs, opportunities, and
everything else. Therefore, I think they stand up a little bit
more to the people with special agendas. They don't allow the
process to just sort of go on infinitum. They keep people's
feet to the fire, and that is what we expect out of our
legislators. We have legal rights, too, and right now defending
yourself in litigation is far more expensive than filing
litigation. We wish there was a little bit of parity, so that
we could get the process done correctly, rather than the way it
is right now.
Mr. Tancredo. As do I.
Thank you very much. I have no other questions.
Mrs. Cubin. Well, I thank the panel for their valuable
testimony, and Mr. Tancredo for his good questions.
If there is no other business before the Committee, we
stand adjourned. Thank you very much.
[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows.]
Statement of Michael J. McKinley, Physical Scientist, U.S. Geological
Survey
Madam Chairman and Members:
I am Michael J. McKinley, a Physical Scientist with the
U.S. Geological Survey (USGS), currently serving as the Chief
of the Metals Section in the Minerals Information Team. I
appreciate the opportunity to appear before you to discuss the
role of metallic minerals in our national security and comment
briefly on the availability of metallic minerals on public
lands.
The Contribution of Metallic Minerals to National Security
Metallic minerals are a key component of the supply of
materials essential to our national security. These minerals
are considered to be strategic and critical when the Nation
must rely on importing them, few countries produce them, and
their use is critical to military and industrial applications.
Despite the dramatic changes in military readiness strategies
in present years, the uses of these metallic minerals are still
critical and most sources of supply are unchanged.
For example, chromium is a metal that is used in stainless
steel and in alloys in high performance aircraft. There is no
substitute for chromium in either of these applications.
However, 95 percent of the world's identified resources of
chromium, which is extracted from chromite ore, are located in
South Africa. The United States has no chromite ore reserves
and only limited occurrences of chromite ore at all. As a
nation, we import 80 percent of the chromium we use; the
remaining 20 percent is acquired through recycling. Although
uses of chromium have changed over time, the supply of chromium
has been a major concern since World War I.
For many years, the U.S. Government has maintained
stockpiles of strategic and critical minerals. However, as the
Department of Defense (DOD) has changed its primary war
planning scenarios, strategies for maintaining an adequate
supply of minerals have also changed. Currently there are more
than 80 materials identified in the Strategic and Critical
Minerals Stock Piling Act of 1939, half of which are metals.
Congress has authorized the sale of many of these stockpiled
materials in response to changing strategies. Only three
commodities have been designated by DOD to be stockpiled for
future use: beryllium (a very light metal used in aircraft
alloys), mica (an excellent insulator used in radar
applications with extreme high voltage), and quartz crystals
(used as a filter in electronics devices.) Whether or not they
are stockpiled, all of these materials are still strategic and
critical, because they are still necessary for the equipment
with which we defend ourselves in wartime and other
emergencies. For example, of the more than 12 strategic and
critical minerals used in modem fighter aircraft jet engines,
only 4 are commercially recoverable via domestic sources.
Availability of Metallic Minerals on Public Lands
At present, there are 141 active metal mines, not including
placer mines, in 16 States. Commodities produced as a principal
product or major byproduct are: antimony, beryllium, cadmium,
copper, gold, iron ore, lead, molybdenum, palladium, platinum,
rhenium, silver, and zinc. Current U.S. laws permit location of
mining claims on Federal lands in 19 States (Alaska, Arizona,
Arkansas, California, Colorado, Florida, Idaho, Louisiana,
Mississippi, Montana, Nebraska, Nevada, New Mexico, North
Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming).
USGS has a long history of assessing the potential for
undiscovered mineral resources. Modern systematic efforts to
determine the potential for undiscovered resources, especially
metallic mineral deposits, began in the early 1960's, in
response to the Wilderness Act of 1964, which required mineral
assessments of public lands prior to withdrawal as wilderness
areas. In the early years of this effort, the products were
qualitative, describing high, moderate, or low potential for
occurrence of undiscovered mineral resources. More recently,
probabilistic quantitative assessments have been developed,
resulting in reports that describe the probability of
occurrence of identified quantities of specific mineral
commodities. The first of these assessments was published in
1976.
Mineral resource assessments have expanded over time to
address the needs of numerous Federal land and resource
planning efforts, including those of the Forest and Rangeland
Renewable Resources Planning Act of 1976, which applies to
National Forest lands; the Federal Land Policy and Management
Act of 1976, which applies to BLM lands; and the Alaska
National Interest Lands Conservation Act of 1980. The USGS, in
coordination with the BLM and the Forest Service under a
Memorandum of Agreement, is conducting mineral resource
assessments on individual land units managed by BLM and the
Forest Service, including BLM districts and resource areas and
National Forests. Other assessments are conducted on Alaska
National Interest Lands and lands designated for various types
of withdrawal. Also, USGS is just completing a Nationwide
assessment of potential for undiscovered occurrences of gold,
silver, copper, lead, and zinc. This National Assessment
estimates that about as much of these metals remains to be
discovered as has already been discovered.
Although many local-scale mineral resource assessments have
been completed or are in progress for BLM and Forest Service,
there is no national systematic assessment of the potential for
metallic mineral resources on all Federal lands. Some of the
factors that make such an estimate difficult include the
dynamic nature of land status, with lands passing from public
to private ownership, and vice versa; methodological
difficulties that arise from the relatively small areas
included in individual tracts of public land and the inadequacy
of scientific data for making predictions in those small areas;
and the inherent uncertainties in making probabilistic
assessments.
The public lands may contain undiscovered deposits of
mineral commodities that could be used to ensuring the national
security. However, ultimately geologic factors, rather than
land ownership, are the most effective predictors of potential
for undiscovered mineral resources. For some commodities, such
as chromite or bauxite ore, there is very little likelihood of
ever identifying significant resources in the United States.
Thank you, Madam Chairman. I will be pleased to respond to
any questions you may have.
------
Statement of Dr. Donald A. Brobst for the Society of Economic
Geologists
Good afternoon, Chairman Cubin and members of the
Subcommittee on Energy and Minerals. I am Dr. Donald A. Brobst
and I am pleased to be here today representing the Society of
Economic Geologists to speak on the future importance of
Federal lands to the mineral and energy economy. Our society
was founded in 1920 and has a membership of more than 3,000
professional geologists deeply involved with the study of and
exploration for mineral deposits of all kinds. We are an
organization that is independent of formal ties to government,
industry and academia, although we may work individually in
research or exploration for a wide variety of employers. The
goal of our organization is to foster research and
dissemination of geologic information for application to the
continuing search for new mineral deposits. Because we deal
constantly with the uneven distribution of mineral resources
within the accessible portion of the earth's crust, the
difficulties in locating them and bringing them to production,
we economic geologists believe that we can offer some useful
insights into resource problems that might not be as evident to
others.
Minerals and fossil fuels are the life blood of our
civilization and its economy. They are the foundation of
society and our personally comfortable lives. Let's face it, no
ancient emperor ever lived better than most of us do now in
what we call the developed nations. These minerals are not just
some abstract things that support the economy. Look around the
room right here. There is stone, cement and steel for the
building skeleton, copper in the pipes and wiring, chemicals of
mineral origin in the paint. Don't forget the materials that
made the tools and other machines that were used to build the
building and the energy that made all of these steps possible.
In the last few years, 1995 for example, domestic mine
production yielded metallic minerals worth about $13 billion
and noninetallic minerals worth about $25 billion. The raw
minerals after further processing for commercial use had a
value of $395 billion in a United States Gross Domestic Product
(GPD) of $7 Trillion. The system of mineral supply that has
allowed us to develop our high standard of living has worked
well. How well will it do in the future is a question to
ponder. How can we keep the mineral resource system functional?
As geologists and citizens, we are greatly concerned about
the future availability of the minerals and fuels needed to
keep the economy of our nation sufficiently productive to
support our population in the life style to which it has become
accustomed, a style to which the more rapidly rising population
of the less-developed world aspires.
The minerals that we use are mined at the surface of the
earth as well as to depths of thousands of feet beneath that
surface. To find these deposits, we must examine large areas,
often examining many prospects that do not turn out to be
mineable. Thus, we are in need of land with which to work. Land
issues, therefore, are fundamental aspects of mineral
exploration and mining. Land policy opens or closes land to
exploration for and production of minerals and fossils fuels.
Land policy sets mining law. Since the early days of our nation
mining law has made exploration and mining permissible on
Federal land.
As you well know, a major mining law that applies to
Federal land was established in 1872. The notion at the time
was to assist individual prospectors in the development of the
West. This meant settlement and the establishment of a viable
economy in that region. The law allows the claiming of lands to
develop and mine minerals after discovery in hard rocks or
those associated with stream gravels, notably gold placer
deposits. Once the discovery was certified and well assessed,
the claimed land could be patented, i.e. removed from public
land to private ownership.
The Mining Law of 1872 worked well for years but more
recently has presented difficulties (Bailly, 1966). Mineral
discovery must be certified on every claim at the time of
staking. Currently discovery certification may require control
of larger areas for commercial success when ``discovery'' may
not be demonstrable on an individual claim, which encompasses
about 20 acres. Discovery is generally now made by drilling
and/or underground workings in areas larger than one claim.
Other problems are seen in the approved legal status of claims
for only two types of deposits, lodes and placers. There is no
provision for staking claims on bedded or other types of
deposits. The apex rule has been troublesome. Who really
claimed the top of the deposit? For it is he who gets to mine
downward. Many times the geology of the deposit does not offer
a clear-cut case, which has opened many arguments. In recent
years, the law has been the subject of considerable debate as
efforts have been made to make it more applicable to present
day mining problems and practice.
From 1920 onward, new laws allowing the leasing of Federal
lands with payments of royalties for production of minerals and
fossil fuels were passed by the Congress. These laws have
allowed continued access to public lands and generated much
additional domestic mineral and fossil fuel production.
It is clear now that U.S. mining law, despite its perceived
flaws, has supported the idea that the nation needed to develop
its mineral resources for the common good. The history of these
mining laws and their problems have been well summarized in a
readable style by E. N. Cameron (1986, p. 204-220).
Although mining law has been altered since 1920 by the
leasing laws, land policy seems to be traveling in the opposite
direction, on a path toward tight restrictions that preclude
mining. More and more public land is being withdrawn from
mineral entry, particularly under the Wilderness Act of 1964.
Under this Act, economic tests were set to make decisions about
the comparative value of various uses of the parcels of public
land being considered for inclusion into the wilderness system.
The law also provided that the U.S. Geological Survey (USGS)
and the now defunct U.S. Bureau of Mines (USBM) should survey
the mineral potential of these designated areas on a regular
and recurring schedule consistent with the ideals of wilderness
preservation. It would now seem that the plan of recurring
assessment has been abandoned. As time goes on, new ideas and
technology appear, making most areas deserving of another look.
It is interesting to note that, although the Wilderness Act
does not allow mining in these areas, it will allow the
gathering of information about mineral and other resources, and
even prospecting, as long as the preservation of the wilderness
environment is respected. The Departments of the Interior and
Agriculture were also requested to review every roadless area
of 500 acres or more of contiguous areas within units of the
national park system, wildlife refuges and national forests to
make recommendations for inclusion of such areas into the
wilderness system. The Federal Land Management Act of 1976 and
the Alaskan National Interests Land Act of 1980 also authorized
wilderness areas but did not include economic tests for the
withdrawals.
The Office of Technical Assessment (1976) indicated that by
1974 the location of minerals under the Mining Law of 1872 had
been prohibited on almost 42 percent of public domain, severely
restricted on about 16 percent and moderately restricted on
about 11.5 percent. The total amount of land withdrawn was 500
million acres. With respect to lands under the mineral leasing
acts, such activity was prohibited on 36 percent of the public
domain, severely restricted on about 23 percent, moderately
restricted on about 6.5 percent. This involves 549 million
acres. Doubtless, access must be even more restricted today.
The affected lands are mostly in the 11 conterminous states of
the Far West and Alaska. On a visually stunning map of the
distribution and classification of ``Federal Land in the Fifty
States,'' the National Geographic Society (1996) indicated that
areas assigned to the wilderness system include 102 million
acres in 360 areas administered by the Park Service (44
percent), the Forest Service (33 percent), the Fish and Wild
Life Service (20 percent), and the Bureau of Land Management (5
percent).
By 1983 the USGS and USBM each assessed 45 million acres of
Forest Service lands in, or considered for, the wilderness
areas. It took 1,000 man-years of effort (Marsh et al, 1983).
That effort did not include any drilling. It appears,
therefore, that lands will be assessed without any information
in the third dimension--depth. Only Congress can release an
area from the wilderness, a likely long procedure even if
evidence of a good deposit is indicated. To demonstrate that
might require information about rock and mineral
characteristics at depth. Getting that information first as
required is probably unlikely. We would hope that the now lone
assessing agency, the USGS, will be financially supported in
detailed recurring assessments that include drilling. Without
information about rocks at depth, the resource assessments are
much less valuable and reliable.
If the Wilderness Act with its closure to mining is the
wave of the future in public land policy, we must ask why this
is so. We must consider the effects of such actions on our
national ability to maintain a high degree of mineral and fuel
independence that will support firmly our economy, our
security, and our comfortable life style through the coming
years. This call for a reduction in mining on more Federal
public land is perhaps an early manifestation of anxiety about
how the human race is using natural resources, how it is
degrading its planetary habitat, and what it will leave for
future generations. We must all come to realize that
understanding and changes evolve, but that certain facts must
be faced realistically.
We need mineral resources to live. These mineral resources
are finite and difficult to find. What we use we grow or mine.
What we grow is renewable; and the minerals we mine are
nonrenewable, although in some cases now recyclable to some
degree. We geologists know that the mineral and fuel deposits
we study and seek are rare and beautiful things. We need to
communicate better that message, which I am trying to do today.
To find a concentration of mineral or fuel material that we can
produce at a profit under the economic conditions of the time
is a real prize. Deposits are sought with great scientific and
technologic effort at a high price. After discovery, they are
developed with more great effort and more money. It is likely
now that most of the easy to find deposits of most types that
we now know about have been found in most areas of the world.
Roscoe, (1971, p 134) noted that in 1951, one in 100 prospects
in Canada that were examined during an exploration program lead
to a mine development and by 1964 the ratio had been reduced to
one in 1,000. This is certainly also true in the U.S. This
means that we must continue to develop new and better ways to
find more deposits in order to supply more people with their
mineral needs. Finding and developing new deposits for
production takes time. It may take 10 to 20 years to bring a
promising show of minerals to successful production. This is a
capital-intensive process. Many economic and legal changes may
end a project and cause great losses before any product can be
sold. It is a very exciting but risky business, this pursuit of
mineral and fuel supplies to support the lives of the consumers
(all of us!). We should keep the land access open because we
might later want to return a once cancelled project.
We must realize that the resources in sight now will not be
sufficient to raise the living standard of the growing world
population to that of the so-called developed nations. Mineral
production is constantly rising with expanding economies. This
says to us quite simply that if we boldly suppose that we now
have a 1000 year supply of a mineral commodity in sight at
present rates of production and plan to increase that
production at a growing rate of 2 percent in each successive
year, our 1000 year supply will be gone in 152 years. Compound
growth is a real killer for resource consumption and population
growth. Is this not a strong argument for continuing research
for new deposits of minerals and fossil fuels and for adopting
land-use policies that can evolve as the social, political and
technologic climate changes?
This line of reasoning implies exhaustion of commodity
supplies. We can recognize geologic exhaustion of a mineral
deposit when we can remove all of valuable ore material such as
that found in a body with sharp walls between ore and adjacent
non-mineralized rocks. Economic exhaustion is more common and
occurs when some mineral material remains, but it is no longer
mineable at a profit. Should some favorable changes occur in
economics or technology, the deposit might again be profitably
mined. This means that we need to permit continuing access to
old mining areas in case they will be opened again as prices or
conditions change.
As we turn to lower grade ore, mineable material with a
lower percentage of the desired material than is currently
available, we will be required to process more tons of rock to
obtain the same amount of that material, which will in turn
require the use of more fuel. When fuel becomes scarcer and
more expensive, the costs of mineral production will rise and
those costs will be passed on to consumers.
We should now look at some of these observations again and
see what they mean to us now. Mining is done because we need
minerals. We want them at the lowest price to sustain our lives
at the highest levels possible. To do that for more people
means that production must increase. The productive life of
many deposits is only 10 to 20 years. If it takes 10 to 20
years to find and bring deposits to production, the deposits we
need in production between 2010 and 2020 must be identified
soon. That means that we must constantly be looking for new
deposits. The need for deposits requires access to land for the
search. Accelerated rates of production at known deposits are
not a satisfactory long-term solution to supply problems.
A nation that cannot produce its own supplies of minerals
must try to buy them abroad. Depending on where the supplies
are located, special problems in foreign relations may be
created. Cartels might seek to control production and
distribution. History shows that many wars are fought over
access to and possession of minerals and fossil fuel supplies
(Youngquist, 1997). Even embarking on such wars requires the
availability of mineral and energy commodities.
The only other option is to do without these minerals and
fuel supplies. Doing without them will lead to the degradation
of living standards at any level. That condition will not be
acceptable to many people. Political and civil unrest may
follow.
Everyone wants a clean healthy environment but everyone
also wants to live comfortably and well. Accomplishing these
two objectives will require the use of many resources,
including those of minerals and energy, prudently and well in
the future and at the least cost to the environment and the
consumer. If there were no need or desire for these
commodities, there would be no mineral and fuel industries. If
there were no geology, there would be no environment.
Much success in the location of new supplies of mineral
resources, developing new technology to produce them in an
environmentally sound fashion, finding substitutes for scarce,
expensive ones, and recycling as much as possible will be
required in the days ahead. Not everything is recyclable,
fertilizer commodities, for example. Recycling, however, cannot
retrieve enough material to supply increased growth. All of
these operations will require the availability of energy
supplies at reasonable cost. New sources of energy will have to
be found and developed. New kinds of energy resources will be
called for. Research and development on these topics needs to
be given high priority.
A closer look at oil suggests that by the middle of the
21st century world oil production will peak. Following the time
of peak production, prices will rise and at some point reach a
level high enough to signal economic, if not geologic
exhaustion. This scenario of peaking production and subsequent
price rise will apply also to any mineral commodity when the
search for new deposits fails to turn up additional deposits.
We should certainly ask ourselves whether a fifty year
supply of anything now is a great comfort to us. Even a 500
year supply at anticipated increased rates of production is not
a great one considering the generations of people marching
through coming geologic time. We must note, however, that
people will have used up the readily available supplies of oil
in about 200 years since Col. Drake drilled the first oil well
at Titusville PA in 1859. The world's petroleum supply took
millions of years to mature: none is younger than 2 million
years. The mineral and fossil fuel deposits that we seek and
use have formed at various places and in times that span
millions of years. This does not mean that we should not use
these resources, but that we should be aware of their origin,
the magnitude of their abundance, and their distribution
because we need them. We must be ready to adjust to changes in
their availability before supply problems cause economic and
societal stress. We need access to land to find the new
deposits.
In conclusion, we are waking up to our environmental
problems. Many people have not yet awakened to the resource
problems. Both of these sets of problems must be examined with
a balanced view. With the need for energy and minerals and the
need for a safe and healthy environment, what balance we set
will greatly affect what we do. Look again at that National
Geographic map (1996). The 11 western States and Alaska have
most of the public lands in question. This region of the U.S.
has most of our large metal mines and some large nonmetallic
deposits of relatively rare materials. This region has a
geologic history through which conditions were very favorable
for the formation of valuable deposits on and beneath the
present surface. Would it not be a good idea to allow for
future access? Would it not be wise to get a better idea of our
mineral wealth on and under Federal public lands before putting
it all out of commercial reach?
BIBLIOGRAPHY
The bibliography that follows presents information on the
publications cited in this text and some other works on mineral
resources that might be of interest to readers of this paper.
Bailly, P., 1966, Mineral exploration and mine developing
problems related to use and management of other resources and
to U.S. public land laws, especially the Mining Law of 1872.
Statement to the Public Land Law Conference, University of
Idaho. Oct. 10, 1966, 43pp.
Brobst, D.A. in V.K. Smith, ed., 1979, Fundamental Concepts
for the Analysis of Resource Availability, in Scarcity and
Growth Reconsidered, The Johns Hopkins Press (for Resources for
the Future) p 106-142.
Cameron, E.N., 1986, At the Crossroads--The Mineral
Problems of the United States: John Wiley and Sons, New York,
320 pp.
Eckes, A.E., 1979, The United States and the Global
Struggle for Minerals: University of Texas Press, 353 pp.
Marsh, S.P., Kropschot, S.J. and Dickinson R.G., eds.,
1984, Wilderness Mineral Potential Assessment of Mineral
Resource Potential in U.S. Forest Service Lands Studied 1964-
1984: U.S. Geological Survey Professional Paper 1300, 2 vol.
1183 pp.
National Geographic Society, 1996, Federal Lands in the
Fifty-States. A map issued with the Oct. 1996 issue of the
National Geographic Magazine.
Office of Technology Assessment Board of the U.S. Congress,
1976, Mineral Accessibility on Federal Land, U.S. Government
Printing Office, Washington, DC
Park, C.F. Jr., 1975, Earthbound--Minerals, Energy, and
Man's Future: Freeman, Cooper and Co., San Francisco, CA., 279
pp.
Roscoe, W.E., 1971, Probability of an Exploration Discovery
in Canada: Canadian Mining and Metallurgical Bulletin v. 64,
no.707, pp 134-137
Youngquist, Walter, 1997, GeoDestinies: National Book Co.,
Portland, OR 499 pp.
SUPPLEMENTAL INFORMATION
SUMMARY
The mining law of 1872 and the subsequent mineral leasing
acts of 1920 and later recognized the need for access to public
lands for mineral exploration and mining because the nation
needed minerals and fossil fuels to support the economy, the
national security, and the comfortable lifestyle of most of its
citizens. With the advent of the Wilderness Act in 1964, lands
began to be withdrawn from mineral entry. If the Wilderness Act
with its closure to mining is the wave of the future in public
land policy, we must ask why this is so. We must consider the
effects of such actions on our national ability to maintain a
high degree of mineral and fuel independence that will support
firmly our economy, our security, and our comfortable lifestyle
through the coming years. This call for a reduction in mining
on more Federal public land is perhaps an early manifestation
of anxiety about how the human race is using natural resources,
how it is degrading its planetary habitat, and what it will
leave for future generations. We must all come to realize that
understanding and changes evolve, but that certain facts must
be faced realistically. Mineral and fossil fuel resources are
finite. We need mineral resources to live. These resources must
be sought and mined at great cost in time and money. We need
accessible land on which to carry out this work. Work on a
promising prospect may take 10 to 20 years to bring into a
production whose life might last 10 to 20 years. This means
that deposits we hope to be mining in 2010 to 2020 must be
identified soon. A nation that cannot produce its own minerals
and fuels must try to buy them abroad. Problems in foreign
relations may be created. Cartels may cause problems and many a
war has been fought over access and possession of mineral and
fuel resources. Doing without these commodities leads to
degradation of living standards and that may be followed by
civil unrest. We must have balance between the need for mineral
resources and the need for a healthy environment. Look again at
the National Geographic map. The 11 States of the Far West and
Alaska have most of the public lands under discussion. This
region has a geologic history through which conditions were
favorable for the formation of many large deposits of metallic
minerals, some of rare industrial minerals and probably more
undiscovered deposits. Would it not be wise to get a better
three-dimensional idea of our mineral wealth on Federal lands
before putting them out of commercial reach?
------
BRIEFING PAPER
Subcommittee Oversight Hearing on ``Mining, the American
Economy and National Security--The Role of Public Lands in
Maintaining a National Asset'' February 23, 1999
The Subcommittee on Energy and Mineral Resources is holding
this oversight hearing to gather factual information on the
state of domestic mining, including trends in domestic mineral
exploration, production and reserves. Mining is a basic
economic activity which supplies the strategic metals and
minerals that are essential for agriculture, construction and
manufacturing. A recent study by the National Research Council
concluded that one of the primary advantages that the United
States possesses over its strongest industrial competitors,
Japan and Western Europe, is its domestic resource base. The
domestic mining industry provides about 50 percent of the metal
used by U.S. manufacturing companies.
The United States is among the world's largest producers of
many important metals and minerals, particularly copper, gold,
lead, molybdenum, silver and zinc and still has substantial
domestic reserves of these metals. Twelve western states
containing more than 92 percent of U.S. public land account for
nearly 75 percent of U.S. domestic metal production. Thus, much
of the United States future mineral supplies will likely be
found on public lands in the West.
Evidence is mounting that while global mineral exploration
trends are strongly positive, U.S. mineral exploration has
entered a protracted downward spiral. Continuation of this
trend in domestic mineral exploration raises serious concerns
that as known reserves are exhausted, significant declines in
domestic mineral production will occur. A long term decline in
U.S. domestic mineral production could result in the loss of
thousands of high-paying, skilled jobs in the domestic mining,
mineral processing and manufacturing industries and increase
reliance on foreign mineral supplies, increasing a worrisome
national trade deficit.
The Subcommittee will call witnesses from a national mining
trade association, a consulting firm, the U.S. Geological
Survey, a professional society and an environmental group to
hear testimony on the following issues: (1) the domestic mining
industry's contribution to U.S. economic strength and national
security, (2) the current levels and trends in domestic mineral
exploration efforts, (3) reliance on imported minerals, and (4)
the role of mining on public lands in connection with the
aforementioned issues.
For further information, please contact Bill Condit at
x59297 or John Rishel at x60242.
------
Additional material submitted by Richard L. Lawson, President and Chief
Executive Officer, National Mining Association
Dear Chairman Cubin:
Thank you for the opportunity to testify on the
Subcommittee oversight hearing on February 23, 1999 on Mining,
the American Economy, and National Security. I believe it gave
the mining industry an excellent chance to show why the U.S.
needs the ability to access public lands for domestic
extraction activities which are essential for our continuing
economic strength while maintaining the sensitivity we all want
for our collective environment.
During questioning of Mr. D'Esposito of the Mineral Policy
Center by Rep. Gibbons of Nevada, several misleading comments
were made about the adequacy of the bonding and reclamation at
the Pegasus Gold Zortman Landusky complex in Montana. I'd like
to correct those errors for the hearing record.
In 1996, Pegasus Gold Corporation and Zortman Mining Inc.
(ZMI) reached an agreement with the Environmental Protection
Agency, and the Montana Department of Environmental Quality,
the Assiniboine and Gros Ventre Tribes of the Fort Belknap
Indian Reservation and the Island Mountain Protectors, which
settled outstanding water quality issues. Without ascribing
liability, the agreement resolved all pending claims against
Pegasus and ZMI for alleged water noncompliance. The agreement
was the result of approximately three years of technical
studies and negotiations. The agreement outlined that Pegasus
and ZMI pay a cash civil penalty of $2 million divided equally
between the Federal Government and the State of Montana. The
companies also agreed to create a $1 million trust fund for the
Fort Belknap Tribes to finance projects identified by the Fort
Belknap Community Council. In addition, the companies agreed to
finance three supplemental environmental projects (`SEP's) for
$1.5 million. The SEP's included improvements to the aging
water supply and distribution systems for the Hays and
Lodgepole communities on the Fort Belknap Indian Reservation,
an independent community health study of residents on the
Reservation and a detailed inventory of aquatic resources on
the southern portion of the Reservation.
In addition, ZMI had to post a compliance bond for the
construction and operation of seepage capture systems and water
treatment plants at both the Zortman and Landusky mine sites.
The compliance bond basically serves as financial assurance for
the state and Federal agencies that all corrective actions that
were identified in the compliance plan will be completed.
Furthermore, the bond had to include contingencies for what-if
scenarios and had to be estimated as if the agencies were doing
the work. It was also a requirement to post bond for treatment
of water into perpetuity.
The compliance bond consists of three parts identified as
the capital bond, the operating and maintenance bond, and the
perpetuity bond. The capital bond covered all compliance
construction work to be completed by year-end 1997, along with
a 10 percent of capital contingency for unforseen problems with
water capture and treatment systems. The total came to
$7,194,260. Furthermore, there was an additional $2,905,260
bonded for five other what-ifs, bringing the total capital
compliance bond to $10,099,894. All of this work was completed
by ZMI within the allotted time frame and in accordance with
all the terms of the consent decree. ZMI has asked the state
for release of this bond.
The operating and maintenance bond consists of operating
labor, maintenance labor, direct and indirect costs and G&A
costs to operate and maintain all water capture and treatment
facilities until the year 2016. This segment of the bond is for
the next 20 years and used a 3 percent inflation rate in the
calculation. This bond also includes water monitoring and
analysis, along with additional what-if contingencies. The
total bond requirement for O&M segment was $14,626,422.
The perpetuity of the long term bond is for replacement
costs of the water treatment facilities every 30 years
discounted into perpetuity, along with costs associated with
the operation of the facility, monitoring, testing, etc. The
total bond amount is $7,603,996. Hence, the total compliance
bond that ZMI secured as part of the settlement totaled
approximately $32 million. The bond was put into place before
year-end 1996 and remains in place to this date.
On January 16, 1998, Pegasus Gold Inc. and certain of its
subsidiaries filed voluntarily to reorganize under Chapter 11
of the Bankruptcy Code. Since that time, the Company's
reorganization plan was confirmed of December 22, 1998 and
confirmation of the plan occurred on February 5, 1999. During
bankruptcy proceedings, all mine sites functioned in accordance
with all state and Federal requirements and continue to do so.
Finally, the MDEQ has determined that the reclamation bond
of $30 million (this is in addition to the $32 million that is
in place for compliance issues) is inadequate, and has asked
the bankruptcy court for an additional $8.5 million. However,
it is the position of ZMI that all necessary reclamation work
can be done for less than the current $30 million and a
detailed estimate of the work was completed by ZMI earlier this
year. Pegasus Gold, ZMI and the state have been in close
contact regarding bond requirements, and negotiations have
progressed very well. ZMI and Pegasus Gold have always had good
working relations with the regulators and, contrary to what
environmental advocacy would like to have others believe, ZMI
will continue to maintain our positive working relationship
with state and Federal agencies in the future.
In conclusion, Mr. D'Esposito's comments are nothing more
than attempts to spread fear, while portraying the mining
industry and in particular Zortman Mining, Inc, in a very bad
light, when just the opposite is true. While having little or
nor credibility regarding mining issues, as the staff of the
Mineral Policy Center are not mining experts, and by not
adequately explaining the facts of the Zortman/Landusky case,
it seems MPC is trying to discredit an industry that has
greatly supported the State of Montana both economically and
environmentally. For over 18 years, ZMI supplied Phillips
County with high paying mining jobs. Over the life of the mine,
ZMI employed an average of approximately 210 people, with the
highest employment rate reaching 300 people during 1994. ZMI
employees consisted of people from all walks of life, including
many members of the Fort Belknap Indian Reservation. All mining
and associated disturbance has occurred within approximately
1,200 acres of private and BLM land--this acreage includes both
Zortman and Landusky mine sites. There are not many ranches or
farms of this size, that I am aware of, that can directly
provide jobs and income of this magnitude anywhere in the
country, not to mention the indirect jobs that were created by
the tremendous amount of goods and services that are required
to operate and maintain a mine site.
As I stated during the question and answer portion of our
panel's presentation, in the vast majority of cases involving
mining operations, the U.S. industry serves as ``active''
environmentalists creating new economic wealth for our nation,
not environmental ``activists'' looking for problems on which
they can litigate, but never arrive at a solution.
If you would like further clarification on this issue,
please contact me and I'll put you in touch with Mr. John P.
Jones who provided NMA with this information. Mr. Jones is
currently the General Manager of the Reclamation Services
Corporation currently under contract to MDEQ for work relating
to operation and maintenance of water capture and treatment
facilities at the Zortman and Landusky mine sites. You may also
contact Ms. Jill Andrews, Executive Director of the Montana
Mining Association.
Additional material submitted by Richard L. Lawson
Dear Delegate Faleomavaega:
During questioning on my testimony before the House
Resources Subcommittee on Energy and Mineral Resources
oversight hearing on Mining, the American Economy and National
Security, you asked me to respond to a Wall Street Journal
article which you said alleged U.S.-based Freeport-McMoRan
Copper & Gold Inc. was causing pollution and only had to comply
with Indonesian environmental standards, not U.S. environmental
standards.
Although I have not yet received the article in question, I
wanted to make sure I responded to you in a prompt manner. As
promised, I checked the situation with Freeport and was
surprised to learn you and your staff visited with company
personnel and spoke with them several times on this issue.
Perhaps Representative Miller's staff representative was
unaware of the dialogue with Freeport when she gave you the
question that you presented to me on the Irian Jaya, Indonesia
situation. I believe your personal staff was checking on the
House voting schedule during our exchange on this issue.
At any rate, I'm enclosing a copy of the six-page letter
sent to you in August of last year from Russell King, Freeport-
McMoRan's Senior Vice President here in Washington, DC. I
believe his explanation of Freeport's environmental record in
Indonesia on pages four and five of that letter is
comprehensive. Further, the some 33 recommendations made by an
independent environmental audit done by Dames & Moore which
Freeport voluntarily commissioned on its tailing management
program, are being fully implemented. I am told you also have
copies of these audit reports. This letter also refers to the
42 separate environmental studies done by Freeport as part of
its AMDAL (comprehensive environmental assessment) which was
approved in 1997. Mr. King also advises me that Freeport is
preparing to undergo its second independent environmental audit
in the second half of this year, which will also be made
public, and I am sure they will provide you copies of that when
it becomes available. Finally, I've enclosed Freeport's 1998
Annual Report, which was just printed and includes a 12-page
report on progress on social and environmental issues. I'm sure
you'll find it of interest.
I also wish to address the clear implication in your
comments before the Subcommittee that Freeport and other U.S.
mining companies deliberately choose to operate in foreign
countries where, in your view, environmental regulations are
not as strict. This is a common misconception. With all due
respect, mining companies put their mines where the minerals
are located. Also, contrary to your suggestion, the
environmental laws of Indonesia are very thorough and modern
having been patterned after those laws of Canada which are in
turn comparable to the United States laws. For your
information, I have enclosed a copy of a speech by Lou Clinton,
former President and Chief Executive Officer of Freeport
McMoran Pacific, detailing the development of environmental
regulations in Indonesia. I think you will find this
interesting and know you will find it enlightening.
As I stated during the oversight hearing, I believe the
companies making up the National Mining Association (NMA) set
the world standard for all aspects of mining in production,
health and safety, and in environmental remediation and
reclamation. Please let me know if you would like to have me or
a member of my staff visit with you further on this issue.
Statement of W. Russell King, Senior Vice President, Freeport-McMoRan
Copper & Gold Inc., Washington, DC
Dear Congressman Faleomavaega:
Thank you for taking time out of your busy schedule to
visit with me and my staff about Freeport-McMoRan Copper & Gold
Inc. (FCX) and the operations of our Indonesian affiliate, PT
Freeport Indonesia (PT-FI), in Irian Jaya. I wanted you to know
the many positive things we are doing.
Our actual operations in Irian Jaya, Indonesia's
easternmost province, cover only a very small portion of the
much larger area in which we are allowed to explore by our
Contract of Work with the Government of Indonesia, In the area
where we do operate, we strive to be a model of economic
development that minimizes negative impacts, maximizes positive
social impacts and respects the rights of local indigenous
peoples.
As I mentioned to you, to assist the local people in Irian
Jaya, we have, in conjunction with the Government of Indonesia,
built hospitals, schools, churches, housing and community
facilities, and have instituted a comprehensive series of
health and educational programs and training and small business
development initiatives to involve the Irianese in the economic
development taking place around them. PT-FI has spent some $120
million on these programs since 1990. We have also sought to be
sensitive to the need of Irian Jaya's unique peoples to
preserve their cultures at the same time they are merging with
modern development. For this reason, PT-FI has long supported
the annual Asmat Art and Cultural Festival and this year
sponsored the first Kamoro arts and cultural festival, which
was highly successful. Catholic Bishop Alphonse Sowada has said
Freeport's support has ``greatly enhanced'' the Asmat event,
which he said ``. . . immensely bolsters both the feeling of
pride and identity within them as being a people of value in
the estimation outside their culture.''
Since we began operations in the area, the average life
span of the local indigenous people has increased and the
infant mortality rate has decreased principally due to the
efforts of PT-FI and the Government. Company public health
initiatives have resulted in an approximate 70 percent decrease
in the incidence of malaria over the past six years and
dramatic reductions of other communicable diseases in the area
inside and adjacent to our Contract of Work. PT-FI has also
assisted the Government and the International Committee of the
Red Cross (ICRC) in providing food and medical assistance to
Irianese in remote areas affected in recent months by food
shortages caused by drought as well as by outbreaks of
communicable diseases. Henry Fournier of the ICRC recently
thanked Freeport for its help in distributing emergency food
and said Freeport's Malaria Control and Public Health Program
have ``. . . been the cornerstone in treating and preventing
the unexpected malaria epidemic in the highlands.'' In an
independent audit of PT-FI's social programs, a highly
respected LABAT-Anderson consulting team reported that these
programs have ``improved people's lives'' and ``go beyond the
usual role and responsibilities of a private company.''
Over 20 years ago, we voluntarily entered into an agreement
(the ``January Agreement'' of 1974) which recognized the
traditional land rights of the indigenous Amungme tribe whose
land was in the area of our operation. Under the Indonesian
constitution, all mineral rights are reserved to the state. We
believe the January Agreement was the first formal recognition
of traditional land rights in Indonesia. Dr. Jacob Pattipi,
then Governor of Irian Jaya, issued a report following a
thorough review, concluding that we had met every legal and
moral intent of the ``January Agreement.'' In addition, the
Company has offered to negotiate with the Amungme and Kamoro
people about ``additional voluntary recognition'' which takes
into account both the greater value of the Company's activities
in the area and the longer duration of those activities. The
plan we have offered to the Amungme and Kamoro is based on cash
generation from dividends and provides the two tribes with
voting rights at PT-FI's shareholders meetings.
PT-FI also recently reached agreement with the Kamoro
tribal communities of Nawaripi and Tipuka and the Government of
Indonesia for the release of traditional rights to additional
lands for developmental programs, including the tailings
deposition area, power transmission lines, additional roads and
the expansion of port and other facilities. In an agreement
facilitated by the Sejati Foundation, a noted Indonesian non-
governmental organization which works to protect the rights of
indigenous people, PT-FI will build even more health clinics,
educational facilities, housing, roads, bridges, village
offices, churches and other community buildings and conduct
economic feasibility studies, for the villages of Nawaripi
Baru, Koperapoka, Nayaro, Tipuka and other areas.
We are aware that the social needs surrounding our
operation in Irian Jaya are ever-increasing. In an area where
only 400 indigenous people lived when we began operations, more
than 60,000 people now reside, including thousands from other
Irianese tribes not native to the area who have moved there
because of the economic growth and prosperity. To help
accommodate these needs, we agreed in April, 1996, to commit at
least one percent of our gross revenues (not net profits as
many mistakenly assert) for the next ten years--an estimated
$15 million a year currently--in support of the Government of
Indonesia's Integrated Timika Development Plan (ITD), a
comprehensive social development plan based upon the input of
indigenous leaders during a year-long series of meetings. The
ITD was launched in July, 1996, and is supported by other
private sector companies doing business in Irian Jaya in
addition to PT-FI.
The LABAT-Anderson team supported the ITD concept in both
its interim and final reports. However, the group cited
problems in the implementation of ITD and made suggestions, for
improvements. Moreover, local Irianese church leaders and some
tribal leaders called for the suspension of ITD disbursements
due to these problems and misunderstandings by the local people
concerning the disbursement process. While PT-FI believed the
ITD was a good plan when it was launched, the company agreed it
was rushed into implementation and that serious flaws resulted.
Accordingly, PT-FI agreed with the government, church and
tribal leaders to suspend further disbursements from the fund
in August 1997 other than for previously approved and essential
programs with ongoing funding commitments, such as malaria
control and public health, job training and scholarships for
Irianese. PT-FI then entered a dialogue with local church and
tribal leaders and government representatives on how best to
restructure disbursements from the 1 percent fund to meet the
LABAT-Anderson recommendations and local desires that the
process be village-based, not tribal-based and that it be
managed locally in Timika.
From these discussions has emerged the Freeport Fund for
Irian Jaya Development (FFIJD), a vehicle for future
disbursements from the 1 percent fund within the guidelines of
the overall government ITD plan. Representatives of PT-FI,
local churches, foundations representing the local tribes--
including LEMASA, a key foundation of the Amungme people which
had opposed the original ITD--are now meeting regularly to iron
out details of the FFIJD funding mechanism in a manner
acceptable to all. The funding of important new projects and
programs to benefit the local people and their development are
now under discussion.
In addition to the important commitments outlined above and
at the request of local leaders, PT-FI agreed in 1996 to
implement training and educational programs sufficient to
quadruple the number of Irianese in its work force over the
next ten years and to greatly increase the number of Irianese
in management and supervisory positions. Progress toward
meeting this commitment has been significant and PT-FI now
employs thousands of Irianese. To support these initiatives,
PT-FI has undertaken a comprehensive employee and pre-
employment training program for the local people and has
established a special section of the Human Resources
Department--the Office of Irianese Education and Development--
to assure the proper hiring, training and evaluation of local
employers and potential employees.
Besides supporting the FFIJD and the payment of additional
voluntary recognition for the Amungme and Kamoro, PT-FI pays
hundreds of millions of dollars annually to the Government of
Indonesia for taxes, royalties, fees and dividends and these
funds support government services that benefit all lndonesians
including the inhabitants of Irian Jaya. Under PT-FI's 1991
Contract of Work, these direct benefits to Indonesia have
totaled $1.1 billion. Moreover, during the same time period,
1992-1998, Indonesia has realized another $5.3 billion in
indirect benefits in the form of wages and benefits paid to
workers, purchases of goods and services, charitable
contributions and reinvestments in operations. In all, 94
percent of PT-FI's total revenues have remained in and
benefited Indonesia and in particular Irian Jaya.
Concerning environmental protection, we constantly try to
minimize our impacts, and are committed to the continuous
improvement of our environmental management systems We are in
compliance with the environmental regulations of the Government
of Indonesia. To help us monitor the environment closely
surrounding our operations, we utilize the services of some of
the world's best environmental scientists and have built a
world-class, modern environmental laboratory.
Furthermore, as part of the Regional AMDAL (comprehensive
environmental assessment, monitoring plan and management plans)
we prepared for our current expansion, we commissioned 42
separate studies assessing the impacts of the operation as well
as the state of the environment in the area--from the nearby
glaciers to the impact of our tailings on marine sediments in
the Arafura Sea. These studies, including studies of social
impacts, were performed by nearly 200 world class independent
scientists who are acknowledged experts in their respective
fields, and the major studies each underwent a ``peer review''
process conducted by panels of yet more independent experts to
verify and validate the original findings. The results of these
studies were presented in a series of academic and scientific
workshops, and were included in the AMDAL documents for public
scrutiny. Arguably, there is no place on the planet that has
received as much intensive environmental and social scrutiny
over the past two years as our project area. PT-FI's Regional
AMDAL was submitted to BAPEDAL (the Environmental Assessment
Agency) and the Regional AMDAL Commission. It was reviewed and
revised and approved in December 1997 by the Minister of
Environment. PT-FI's AMDAL was termed `. . . the most
comprehensive (BAPEDAL) has ever seen,'' by AMDAL Commission
Chairman Paul Coutrier, then-BAPEDAL Deputy Chairman for AMDAL
and Technical Development.
However, in both these areas--social and environmental--we
recognize that we are developing in a complex arena and that we
can always find ways to improve, For that reason, as mentioned
before, PT-FI took the extraordinary steps of voluntarily
submitting to thorough and independent social and environmental
audits conducted under the auspices of BAPEDAL. The findings of
the independent environmental audit and interim report of the
social audit were made public in 1996 and the final social
audit report was released in 1997. We know of no other company
that has submitted itself to such intense, independent
scrutiny, the results of which have been released to the
general public.
The LABAT-Anderson social-cultural audit team consisted of
internationally recognized sociologists and anthropologists,
environmental analysts, specialists in development and
agriculture, educators and health experts and individuals with
a long history of working in Irian Jaya. This helped assure an
independent, balanced and thorough approach. The LABAT-Anderson
team recognized the complexity of social development issues in
Irian Jaya and we benefited from the ``fresh look'' their
report provided, which is one of the advantages of the
independent audits. The report found that much progress has
been made, but that much remains to be done. Mistakes have been
made due to the complexity of Irian Jaya's social landscape and
the unprecedented challenges faced there, Nevertheless, we
remain completely committed to this process. The LABAT-Anderson
team made a number of suggestions for reevaluation of program
elements and we completely agree and are implementing their
recommendations. At the same time, the report also says PT-FI's
efforts ``show good intentions'' and that the company
``recognizes its social responsibility and that social
development must keep pace with industrial and economic
development.''
The environmental audit by Dames & Moore, conducted by a
team headed by the Hon. Ros Kelly, former Australian Minister
for the Environment, endorsed our tailings management program.
Dames & Moore found that PT-FI's tailings management program is
``the most suitable option'' for the environment in which we
operate and that the long-term risks associated with
alternative tailings management options are ``unacceptable.''
Moreover, the report found that the tailings are non-toxic and
that our mining operations do not pose any significant risk to
Irian Jaya's biodiversity. Overall, the Dames & Moore team made
33 recommendations, all of which were accepted and are being
implemented.
I left with you copies of both of these audit reports for
your information. I realize I left you more information
regarding these two areas than you anticipated, but I believe
that to have a thorough understanding of our company and its
motivations, you have to have at least an inkling of the great
lengths to which we have gone and the dramatic steps we have
been willing to undertake in order to insure that our operation
is beneficial to our Irianese neighbors and our Indonesian
hosts.
On the subject of human rights, PT-FI's numerous social
programs outlined above have done much to help secure basic
human rights for our Irianese neighbors and employees. These
include opportunities for employment and an adequate standard
of living, access to heaIth care and other social services,
educational opportunities and cultural preservation. PT-FI is
also working with the Government of Indonesia in a variety of
ways to help establish the civilized rule of law in this remote
part of the nation, including grassroots education on the
basics of law and support for the Government as it establishes
a civil and criminal court system. This helps assure Irianese
of the human rights protections provided by access to a civil
and criminal legal system.
There is a small separatist group operating in Irian Jaya
known as the OPM (Organisasi Papua Merdeka) that, over the last
several years, has engaged in a number of violent clashes with
the armed forces of the Government of Indonesia and there have
been allegations of human rights violations in connection with
some of this activity. These have been investigated and the
individuals in the military who were determined to be involved
have been punished. The OPM has also been accused of engaging
in human rights violations and terrorist acts, including the
murder of one of our Irianese employees and the attempted
murder of others and, in 1996, two protracted hostage-taking
episodes which resulted in the deaths of four hostages. In one
hostage situation, the victims were environmentalists and
students affiliated with the World Wildlife Fund. FCX and PT-FI
are on record strongly condemning all of these alleged human
rights violations by either side in the conflict, as well as
taking a strong position in defense of human rights in annual
reports, press releases, correspondence and official
interviews. FCX and PT-FI have also repeatedly and publicly
stated their support of any legitimate investigation of alleged
human rights violations. Furthermore, we have urged the ICRC
(International Committee of the Red Cross) to establish a
permanent presence in the Timika area. We are also working with
UNDP and UNESCO to establish representation in the area.
Congressman, once again thanks for taking the time to meet
with me and I appreciate your forbearance in reading this
lengthy letter. However, I felt that you would appreciate
having on record many of the things which we talked about.
Please do not hesitate to call upon me if I may be of further
assistance.
A PROSPECTIVE ON ENVIRONMENTAL REGULATORY ISSUES IN INDONESIA
Louis A. Clinton
There is a myth that today most U.S. based multi-national
companies seek to move their investments overseas to developing
countries because those countries care less about the
environment and/or do not propose to regulate in order to
protect the environment. As a rule, I do not believe this is
true for many developing countries, and certainly not for
Indonesia. As I will illustrate later in my discussion,
Indonesia has a major commitment to environmental conscious
developmental policies and has the laws and regulations in
place to implement this concern. I might also point out that
Indonesia has a very active group of environmental NGO's which
affect government policy both within and outside of the
relevant Ministries.
Indonesia has developed a broad, comprehensive and fair
environmental regulatory system within their country. Permit me
to illustrate some of the specific steps they have taken to
assure that their environmental laws and policies have kept
pace with the increasing interest and priorities in this area.
First, the Government of Indonesia (GOI) passed a ``omnibus''
environment law in 1982 (entitled Act of the Republic of
Indonesia No. 4 of 1982--Concerning Basic Provisions for the
Management of the Living Environment). This landmark
legislation provided for a comprehensive environmental
assessment review to be completed for any major project prior
to initiation of construction. This comprehensive legislation
is quite comparable to the initial development of a similar
type of legislation in the United States known as NEPA
(National Environmental Protection Act) which began the
requirements for Environmental Impact Statements in America for
all major projects. Bear in mind that this landmark United
States law was enacted in 1969, only 13 years prior to a
similar law being passed in Indonesia. It was not until a year
later that the U.S. EPA was established; and the specific
framework for environmental standards only developed after
enactment of U.S. legislation in the mid-1970's. Therefore, the
GOI development of similar requirements is somewhat
contemporaneous to that in the U.S.
The development of the omnibus environmental law in
Indonesia, and subsequent regulatory programs to be discussed
later in this talk, was not done in a vacuum. Rather it was
done with the assistance of international groups with expertise
in the area of environmental management. Specifically, a
program was developed in 1983, called the Environmental
Management Development in Indonesia (EMDI) Project, which was a
cooperative program between the governments of Indonesia and
Canada to assist Indonesia with development of environmental
regulations. Thus, many of the environmental rules in Indonesia
have been patterned after those in Canada which, in turn, are
quite similar to U.S. environmental legislation and
regulations.
In 1986, the GOI passed Government Regulation No. 29
Regarding Environmental Impact Assessments. This law added form
and specificity to the 1982 law and set up the formal
Environmental Impact Assessment program (called AMDAL). The
cornerstone of this process called for the preparation of an
environmental impact statement type document known as an
Environment Impact Assessment Document (ANDAL). The ANDAL
requires an applicant for any major industrial facility to
provide significant technical, environment and social/economic
data on all aspects of the project. It also required a
comprehensive Environmental Management Plan (RKL) and
Environmental Monitoring Plan (RPL) which specifically detailed
all of the monitoring and environmental management activities
to be conducted over the life of the project. The law also
established an Environment Impact Assessment Commission to
review all ANDALs before a project can begin. The Commission is
composed of numerous federal government Ministry and Department
heads, as well as Provincial Government representatives,
experts from relevant fields and non-government organizations
(NGO's). Therefore, there is broad based review of all major
projects in Indonesia from an environmental perspective by
various federal and regional government agencies, and the
general public.
A special Ministry had been created for environmental
policies known as the State Ministry of the Environment. It was
headed until approximately four years ago by the
internationally recognized environmental expert Bapak Emile
Salim. In 1990, Indonesia expanded its environmental management
capabilities by establishing a new agency within the State
Ministry of the Environment known as BAPEDAL (Environmental
Impact Management Agency). BAPEDAL's mission was formally
established ``to execute the government functions to control
environmental impacts using ecological principles and the
utilization of natural resources such that negative impacts of
development do not alter environmental functions.'' Since its
establishment there has been significant growth and development
of BAPEDAL. The agency now has a broad range of regulatory
control. Regulations exist for water discharge limits,
receiving stream water quality standards, air emission limits,
ambient air quality standards, hazardous and toxic materials
control, among many others.
In approximately 1992, BAPEDAL developed an Environmental
Audit Program and Environmental Performance Rating Program to
assess industries compliance with GOI environmental
regulations. This program called for major industries in the
country to have third party environmental audits conducted at
their facilities and the reports to be submitted to the
government containing the findings of that company's compliance
with GOI regulations and world-wide management practices. The
government developed a publicly announced environmental score
card or environmental rating system based on a color code given
to various levels of compliance performance. The program has
been quite effective in bringing public attention to these
matters and has resulted in significant conformance with
environmental rules in the country by industries.
In addition to the environmental agency and environmental
laws and regulations discussed above, the GOI also has
environmental standards, controls and inspection rules within
various Ministries and Departments of State. For example, the
Department of Mines and Energy (DOME) has a special Bureau of
Environment and Technology that closely regulates mining and
energy projects. This includes routine inspections of
operations, as well as requirements for operations to submit
comprehensive quarterly information and data on environmental
monitoring and management activities. Therefore, there is a
double layer of environmental review of these industrial
operations by the environmental agency (BAPEDAL) and the
respective State Ministry under which that industry operates
(DOME, Ministry of Industry, etc.).
Finally, the Government of Indonesia passed in 1992 a
national land use/planning law that required Spatial Land Use
Plans (RDTR) that emphasized regional and area planning and
coordination for all environmental impactive developments. This
has enabled the government to study, on a regional basis,
environmental impacts so that the most efficient use of
resources can be made with the least potential environmental
impact.
So as we can see, the Government of Indonesia has for some
time now had a very comprehensive environmental legislative and
regulatory program that has established landmark ``omnibus''
type environmental requirements, such as environmental
assessment studies prior to initiation of major projects, and;
all of the various quality control standards that one can
routinely find in developed nations around the world. Truly,
the government has done its part in clearly delineating its
concern for the environment.
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