Treasured Bureaucracties

by Karyn Moskowitz
Senior Associate
The Thoreau Institute

Table of Contents


The federal government owns the mineral rights on hundreds of millions of acres. The oil, gas, coal, gold, and other minerals form some of the most valuable assets in the federal portfolio. Yet many of these minerals are given away, and others are sold at less than optimal rates.

Opponents of hardrock mining on public lands tend to blame all misguided public mineral policy on the antiquated Mining Law of 1872. However, a closer look at agency budgets reveals not only that prices for minerals are regulated below cost, but that perverse incentives encourage managers to both promote mining over environmental values and lose money on mineral leases and sales. If political roadblocks prevent changes to the 1872 law, we can still do much to improve federal mineral management.

Federal Mineral Agencies

The agencies that manage federal minerals are numerous and complex. They include the Bureau of Land Management (BLM), the principle public land agency involved with minerals management, and the Mineral Management Service, which handles most of the collections and disbursements from mineral leases.

Other federal and state agencies involved in minerals management include: the (now defunct) Bureau of Mines, Geological Survey, Office of Surface Mining and Reclamation, and Environmental Protection Agency, all of which contribute technical services to the mining industry, regulate the health and safety of workers, and handle reclamation of strip mines, among other things.

Federal land agencies, including the Forest Service, Fish and Wildlife Service, Army Corps of Engineers, various branches of the military, and Bureau of Reclamation, all have jurisdiction over lands that contain valuable mineral deposits beneath the surface. While these agencies have jurisdiction over the surface lands, subsurface minerals are handled almost exclusively by the BLM. The primary exceptions are acquired national forest lands, mainly in the South and East, which retain jurisdiction over their subsurface minerals.

Minerals: A Brief Sketch

Public lands hold as much as 60 percent of the coal reserves in the western United States, 35 percent of the nation's reserves of uranium, as well as many other minerals. The BLM administers an onshore surface and mineral estate of 272 million acres primarily in the western United States, plus only the mineral estate underlying another 300 million acres all over the United States.

The energy and mineral resources on public lands are classified as salable, locatable, and leasable, depending on the type of mineral deposit and whether it underlies public domain land (that is, land that has never been in private ownership), or public land acquired by the federal government:

The government generally receives no royalties on locatable minerals, but it often gets fair market value for salable minerals and either competitive or noncompetitive bids on leasable minerals.

The Agencies: Captured?

Mining of non-hardrock minerals such as oil, gas, coal, and gravel returns money to the Treasury. However, net returns to the Treasury tend to be far less than what it takes the agencies to administer their programs. Most federal minerals cost taxpayers money without even counting the $32 billion to $72 billion the Environmental Protection agency estimates is necessary to clean up the 550,000 abandoned hardrock mines nationwide, nor the hundreds of millions of dollars used to relocate communities living in proposed mining sites.

To the public eye, the main minerals manager, the BLM, seems to be "captured" by the hardrock mining industry. Like Forest Service managers who seem to favor a huge timber program over other forest values, BLM managers face budgetary and other incentives to extract minerals:


The Minerals Management Service was created in 1982, and collects and distributes most of the rent, bonuses and royalties from minerals for the onshore, Indian, and Outer Continental Shelf (OCS) programs. Various laws and regulations direct that revenues be distributed as shown in table one.

The Minerals Management Service faces budgetary incentives similar to those of the BLM. For example, managers can charge extra for certain leases and keep 100 percent of the extra charges for "special projects." From 1994 to 1997 this has ballooned from $5 to $41 million per year. The service also gets to keep a share of receipts for "handling fees." Recently this share has been about $24 million per year.

A separate table lists agency-by-agency receipts and costs in fiscal year 1996.

Table One
Percentage Distribution of Federal Mineral Receipts
                      US     Counties/ Bureau of   BLM 
                   Treasury   States  Reclamation Range 
Public lands          10        50        40
Bankhead-Jones        25        25                 50
Acquired Grass Lands  75        25
Acquired Forest Lands 75        25
Corps of Engineers    25        75
Military Lands        10        50        40

Mining Today: A Free Market?

A multitude of environmental regulations apply to mining projects, all the way from the National Environmental Policy Act, to the Clean Water Act. However, top-down efforts to control the environmental costs of mining have not worked for a number of reasons.

The combination of the free access privilege inherent in the 1872 Mining Law, and agency inefficiency and downsizing gives modern hardrock miners the incentive to abuse this privilege. In other words, miners stake many claims, and often spurious ones, in this open "commons." Therefore, federal land managing agencies continue to spend a good deal of time, money, and energy in clearing invalid, unpatented mining claims from the federal lands, and otherwise combating various Mining Law abuses. Regulatory efforts are highly diffuse and ineffective and leave few resources available for environmental protection.


Mining, per se, may not be evil. What is wrong is the incentives at work that not only encourage, but mandate, gross environmental, economic, and cultural destruction. For example: A number of institutional reforms will help protect environmental resources and let taxpayers realize the full value of mineral resources on our public lands:
  1. Turn minerals over to managers of surface lands. This would include transferring management of minerals within national forests back to the Forest Service;
  2. Let the new managers charge fair market value for minerals along with other resources; and
  3. Fund these agencies out of their net income.
Letting the agency that manages the surface resources also manage the subsurface ones allows a better balancing. Of course, under the 1872 mining law, there is no balancing: Minerals trump everything else, no matter what or how valuable. So any reform of the 1872 law that transfers minerals to agencies with surface rights must also give those agencies balanced incentives.
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