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	<title> - OVERSIGHT HEARING ON MINING, THE AMERICAN ECONOMY AND NATIONAL SECURITY</title>
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	[House Hearing, 106 Congress]
	[From the U.S. Government Publishing Office]





	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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