Mining is a dirty business. Mines can
threaten habitats, leak toxic chemicals, pollute drinking water
or scar a landscape.
In 1872, though, President Ulysses S. Grant
had different concerns. Following the Civil War, Grant wanted
to promote a westward expansion not seen since the Gold Rush.
To do so, he offered a sweetheart deal to anyone interested in
mining federally owned land for the nation's abundant supply of
gold, silver, copper and zinc, among other minerals. He
directed Interior Secretary Columbus Delano to sell public land
to mining companies for as little as $2.50 an acre-a rate that,
incredibly, is still on the books today. Recently, the federal
government sold 155 acres in Crested Butte, Colo., to
Freeport-McMoRan Copper & Gold Inc., Phoenix, for $790-or a
little over $5 an acre. According to the company, the land
could yield $158 million in after-tax profits over 11
To further encourage expansion, Grant said
that mining companies wouldn't have to pay royalties on what
they mined. Since 1872, the value of minerals taken without
compensation is an estimated $245 billion, according to Ryan
Alexander, president of Taxpayers for Common Sense.
Even further from Grant's mind, however, was
the question of who would end up holding the bill when a site
had been thoroughly mined and abandoned. The answer, according
to Alexander, is taxpayers. The price tag for cleaning up
abandoned sites is between $7 billion and $24 billion, with
more than half of that being charged to taxpayers.
In 1920, Congress removed oil, gas and coal
from the Mining Law, ensuring that energy companies leasing
federal lands would pay a royalty-currently 12.5 percent-to the
government on what they extracted. But with only a few
exceptions, hardrock mining companies still don't pay a dime in
royalties to the federal government. Some in Congress say it's
time for that to change.
Late last year, the House of Representatives
passed a bill that would require royalty payments of 4 percent
on existing mines and between 8 and 9 percent on new mines.
That money would be put into a fund to pay for the clean-up of
abandoned mines. The bill also would establish overall
environmental standards for mining on federal lands. Currently,
mining is regulated by a wide array of federal, state and local
laws, sometimes leading to confusion and varying standards.
As good as reform of the law sounds to
environmentalists, the House bill is considered all but dead on
arrival in the Senate, where pro-mining members hold prominent
positions. Senate Majority Leader Harry Reid (D., Nevada) has
said he will not move a bill that requires current mines to pay
royalties. The Senate has decided to write a bill of its own,
but mining companies have sent a clear message don't
Testifying before the Senate's Energy and
Natural Resources Committee, William E. Cobb, vice president of
environmental services for Freeport-McMoRan, said that
additional federal regulation of mining on federal lands is
"unnecessary, duplicative and unreasonable."
James Cress, a partner at the Denver law firm
of Holme Roberts & Owen LLP, told the committee that it
would be unfair to apply regulations on coal, oil and gas
mining to hardrock mining. Hardrock mining costs vary widely
from project to project, and the overall cost is far greater
than that of mining for energy reserves like coal, which is
relatively plentiful. Cress, who deals extensively with U.S.
mining and oil and gas law transactions, said that a gross
royalty of 8 percent is unheard of in private negotiations with
the exception of Newmont Mining Corp.'s Gold Quarry in Nevada,
which was known to contain 8 million ounces of gold-not the
typical case on unexplored federal land.
Lurking behind the issue, as it is with so
many others, is China. Those opposed to the legislation say
that raising the cost of mining in the United States will
simply encourage companies to mine overseas in countries with
virtually no environmental regulations. The argument echoes
those of the steel industry, which opposes a cap-and-trade
program to stem greenhouse gas emissions.
The United States already relies too much on
imported minerals, which also are being sucked up by China and
India, said Cobb, who also is a spokesman for the National
Mining Association. "As these countries continue to evolve and
emerge into the global economy, their consumption rates for
mineral resources are ever-increasing," he told the committee.
"Even now, some mineral resources that we need in our daily
lives are no longer as readily available to the United