Treasured
Bureaucracties
by
Karyn Moskowitz
Senior Associate
The Thoreau Institute
Table of Contents
Introduction
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.
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.
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:
- Salable mineral resources include common varieties of
minerals such as sand, gravel, stone, pumice, pumicite, cinder and clay;
- Locatable mineral resources include metallic and nonmetallic
minerals, or "hardrock minerals", like gold, silver, bentonite, beryllium,
copper, fluorspar, molybdenum, uranium, nickel, lead, zinc, cobalt, mercury,
platinum and palladium;
- Leasable resources include fluids, such as oil, gas, and
geothermal, or solids, such as coal, lead/zinc, phosphate, potash, potassium,
sulfur, oil shale, sodium, and so forth.
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.
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 BLM is appropriated nearly $70 million a year to manage their minerals
program;
- BLM managers get to keep 100 percent of the nearly $33 million a year in
holding fees brought in by hardrock claims, and $500,000 in receipts from lands
purchased under the Bankhead-Jones Act; and,
- BLM managers get performance reviews based on such measurements as number
of oil and gas leasing inspections carried out in a year, and the number of oil
and gas applications for permit to drill processes.
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
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:
- The agencies are appropriated funds to manage mining programs regardless of
whether there is any actual net return to the Treasury;
- The federal government subsidizes the mining industry by giving it the
right to damage sensitive areas that contain other resource values without
requiring miners to clean up waste sites; and,
- Forest Service and BLM managers spend large amounts of public monies in
carrying out the 1872 mining law's mandate to prove valuable deposits of
minerals and develop claims, and force claimants to mine, or at least make an
effort to prove they are mining, even if claimants have the desire to leave the
land alone.
A number of institutional reforms will help protect
environmental resources and let taxpayers realize the full value of mineral
resources on our public lands:
- Turn minerals over to managers of surface lands. This would include
transferring management of minerals within national forests back to the Forest
Service;
- Let the new managers charge fair market value for minerals along with other
resources; and
- 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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