4. Domain to be tied up merely to secure rights to the same ore body. That is not a desirable situation. Extralateral rights becoming moot of its own accord Eliminating extralateral rights may seem to some as a move toward simplicity. No doubt that is true. However, I question the need to make that move. If, as I contend, fewer and fewer of the types of ore bodies that presently qualify for extralateral rights will be mined in the future, then the question of extralateral rights will come up less and less. Hence, such cases would become "interesting academic history." Because the existing law already says that there are no extralateral rights for non-qualifying ore bodies, because elimination of those rights for qualifying ore bodies tends to require more of the Public Domain to be tied up, and because extralateral rights do not seem to be a problem in the first place -- I question the need to do away with them. Rather, when a discovery in fact has been made of a qualifying orebody, especially when that orebody is the primary discovery (as opposed to a secondary discovery), retention of a form of extralateral rights is appropriate. SECTION 104: CLAIM MAINTENANCE REQUIREMENTS (b) Rental Fee, (c) Diligent Development Expenditures, and (d) Payment in Lieu of Diligent Development In each of these cases fees and expenditures are expressed on a per acre basis. Naturally such figures appear "softer" than if expressed on a per claim basis. Example: rents of $1.50 to $5.00 per acre become $60 to $200 per claim for a single 40 acre claim. Diligence expenditures of $20 to $160 per acre become $800 to $6,400 per claim for a single 40 acre claim. A first level of scrutiny calls for clarification of the definition of "legal subdivisions". Sec. 101 (a) (5): does HR 918 contemplate provision for claim location of less than 40 acres for a claimant who wants less, or merely provide allowance for some pre-existing property right? If the former, perhaps the costs would not seem so onerous. If the latter, HR 918 should clearly say so. With a sense the latter is the intent, the proposed levels are onerous indeed. Rentals, work requirements, and tenure as-long-as-you-pay can not be looked at as anything but a leasing system. Under any definition, a lease is a contract between a landlord and a tenant in which the former grants to the latter the use and possession of property for a period of time, for a specified rental, and Occasionally for a specified work requirement. Merely because HR 918 does not amend or fall under the Mineral Leasing Act of 1920 does not disqualify it as some form of leasing arrangement. Therefore to say HR 918 is not a leasing act is disingenuous semantics. Certainly the mere abandonment of "discovery" points to that. And in what other light could the provision of Sec. 104 (d) (3) be interpreted? That new provision seems designed only to penalize one for making what may be a prudent mining decision during a depressed market. A money-grubbing landlord might insist on that, while no partner interested in mineral development ever would. There are aspects of the work requirement concepts of HR 918 that merit special consideration. For example, I believe increased diligence will foster increased surface disturbance. I believe the proposed expenditure levels are unnecessarily high. And yet, I believe in lieu payments in concept are perfectly appropriate. Here follows a discussion of each of these points. Increased Diligence as Fostering Increased Surface Disturbance: The expanded definitions of what might constitute diligent development under HR 918 are worthwhile. Nevertheless, I think the increased expenditure levels would foster surface disturbance for the sake of compliance. For given the miner's choice to put cash in somebody else's pocketbook or into the ground, his underlying desire is to invest in his asset: his mine. Now, there comes a period when all the exploration the miner needs to do is done. He has done all his testing work, laid all his plans, and has posted all his reclamation bonds. Very plainly, it is time to dig. Suppose at that time the bottom drops out of the market for the commodity which he intended to mine, and which was so attractive to him that it spawned his exploration efforts in the first place? The miner is not going to spend more money on diligence work because there is plainly no return in it. And yet, the market would not support a profitable endeavor for his production efforts. - Faced with having to spend some money merely in order to hold the fruits of his labors up to that point, I believe the miner would turn to improving his asset. That is, he would turn to making bona fide efforts (which designation curiously is found missing from HR 918 over earlier drafts, but is presumably what is meant by Sec. 104 (c)(2)(F): "Such other mineral activities as the Secretary shall, by rule, establish."]. These efforts include tunneling, drifting, stope preparation any reasonable mine development short of production even though they themselves provide no return. This work comprises significant environmental and surface disturbance which would be simultaneously better for the environment and for the miner's finances not to have to make at the time. Nobody wants to see the environment torn up unnecessarily. And, it's a harsh provision on the one who has shown the initiative in the first place and who has been blessed with success! At the very least, some provision should be made for carry over of excess diligence work by some formula from one year to the next, to minimize unnecessary surface disturbance and to relieve the miner. Expenditure Levels: On the matter of expenditure levels and how reasonable or unreasonable they may be, one never knows when that level may be unreasonable until one has reached it. And, having reached it, one would find one has already caused the ruin that was never intended. In similar fashion, certainly the King never anticipated our revered progenitors would don feathers and war-paint and toss his tea into Boston Harbor! The approach to expenditure levels should be gradual, carefully examining the effects of each increase so as to avoid that ruin. HR 918 takes a big chomp all at once. An appropriate illustration of the effect of small fee increases is to be found in my home in Colorado. It so happens I have begun a study of a recent amendment to the Colorado Constitution which involves small fee increases on mining claims: In the 1988 November general election, Colorado voters were called on to consider Amendment No. 5: "an amendment to Section 3 of Article X of the Constitution of the State of Colorado, creating an exemption from property taxation for nonproducing unpatented mining claims (emphasis added)." The amendment passed. I am sure that to most voters the proposition sounded like benign tax relief. However, no where on the ballot was it mentioned that Colorado Senate Bill #134 was poised to go into effect should the amendment pass. That bill provided for a new $5 per claim filing fee to be paid annually to the county clerks for each mining claim on which an affidavit of annual labor was recorded. It was also never mentioned in the debate that at the same time the BLM had decreed an identical new filing fee increase for recordation of the same claim with it. The result for 1989 was that mining claim holders were required to pay a new $10 in recording fees where previously they were required to pay none. Who would disagree that $10 per claim is a small fee increase? Now the argument in favor of the amendment came largely from the Colorado County Treasurers Association. Counties had been levying property taxes on unpatented mining claims. While some claimants had been paying the tax, many did not. The treasurers had difficulty collecting, and they dismally failed in their attempts to sell the claims for back taxes: they could not produce title to a prospective tax buyer. The tax itself was unenforceable. Anyhow, the amendment passed. I have recently begun a study of its effects on both county revenues and on number of claims registered in each county. The study covers the two years prior and the two years following the amendment's passage. At this point, I have examined the records of four counties where I live. (I have not yet obtained funding to complete this study for all the affected counties in the state). Specific findings are available on request, but meanwhile the preliminary results are summarized below: As a check, across the state over the same period of time the total number of claims dropped by 34%. That attrition appears directly attributable to the small fee increase, for Colorado has not experienced a "boom" for a locatable mineral commodity in that time. After examining the data, I have drawn the following conclusions on the effects of Amendment #5: 1. County revenues experienced mixed results in the transition from "property tax" collections to filing fee payments. 2. The total number of unpatented claims recorded on the county rolls drastically diminished. 3. A relatively small fee increase had tremendous effect. I add to these conclusions the following speculations: 1. Those who dropped their claims were not very "proud" of them not to have weathered the small fee increase. 2. Most of the claims dropped were those regarded by some, including myself, as "nuisance" cases on which no money was actually expended in the initial instance... probably in abuse of the existing law. Now, it may have been the ulterior object of some to clear the public domain of such "nuisance" or "stale" claims. If so, it is working. But one thing is perfectly clear to me: LARGE fee increases will have disastrous effect! Meanwhile, retaining the $100 per year diligence requirement while offering a $50 payment in lieu option is at this time utterly reasonable to make. I am here to tell you right now that the expenditure levels proposed in HR 918 are too high for me to bear. They discourage me from getting started in the first place. They are timed poorly and in such a way as to impede my progress before I have even seen success in my mining efforts. It does not take a clever person to see that the proposed expenditure levels trend toward the advantage for larger and well monied mining companies, and toward disadvantage if not outright ruin for small miners such as myself. If a system is basically working but is subject to certain abuses, small bites over time would clear the abuses without severely hurting the legitimate practitioners. In Lieu Payments and Speculation: I am in favor of the concept of in lieu payments. In concept, they would enable me to hold a valid discovery which I might have made through a time of depressed market conditions or personally stressed finances. I only quarrel with the dollar amounts proposed. Some argue that in lieu payments foster "speculation". In the most general of terms, "speculation" is the outlay of money in an enterprise offering the hope of high reward in return for the incurring of high risk. That describes mining in a nut shell! There is no guaranteed return for exploration dollars spent, and only a slight reduction of risk when one starts his tunnel underground for locatable minerals, anyway. In the context of this debate, however, I believe "speculation" refers to claims lying idle and not producing. - It has been pointed out that there is no provision in the current mining law (for locatable minerals) requiring that minerals actually be produced. The current law's origins are readily traced to the customs of the early mining camps. There, speedy development leading to production was always the intent --never idleness or "speculation". But I suspect that the conditions giving rise to "speculation" simply did not exist then. Who has considered that metals prices in those days were relatively stable? Or, that at times -- even modern times -- various metals prices were guaranteed by the U.S. Government? Under such conditions, nobody would bother to develop an ore body in which they had only found ore that could be produced at greater cost than the going rate for the product. They would tend to abandon the prospect... not hold on to it, or "speculate" as the case may be. Thus, in light of our current free market systems, and the broad price fluctuations for metals thereof, pointing to the intent of early customs is off the mark. These days an enterprising miner who is already in production can minimize the risk of exposure to fluctuating market prices by arranging forward sales. However, a small miner such as myself cannot because he does not have scratch to start with. In the case where a discovery in fact has been made, where under former market conditions it would be demonstrably profitable, but where under current conditions it was not profitable, I believe the reward of possession for that discovery is justified. further believe the ability of the discoverer to "hold" his discovery and hence "speculate" should not be hampered. - There is also the case where a prospector runs out and stakes claims like Sherwin-Williams to "cover the earth". He may have no intent to pursue the development of those claims with his own diligence. His intent may be to hold up some other enterprise, such as a public works project, with trumped up claims of "trespass" while hoping to be bought off. Worse, his intent may be to swindle innocent investors out of their money by making fraudulent claims of discovery and promises of return from future production. These kinds of "speculation" are objectionable. In the first case, I believe there is justice in allowing the discoverer to speculate. In the latter cases, there is not. Now, it would not surprise me if large and well monied concerns charge that in lieu payments would foster speculation. Higher rentals and diligence requirements will force some of the smaller players out of the game. In turn, mineral lands on the public |