HTML _ 94-540 - Hardrock Mining, the 1872 law, and the U.S. Economy
1-Jul-1994; Bernard A. Gelb; 15 p.

Abstract: Enacted to promote mineral resource development and the settlement of the Western United States, the General Mining Law of 1872 as amended provides easy private access to hardrock mineral resources on Federal lands. Partly as a result, mineral and economic development in the West has been substantial. A cost of the significant benefits realized as a result of the 1872 Law, however, is a different, less economically efficient, allocation of resources than would be in place without the 1872 Law. In the view of many, this includes insufficient attention to environmental values. Critics also say that the Law is outdated, and that the Government (as custodian of the land for the citizens) gets very little return for making the land and mineral resources available. Impetus to ¨reform¨ the 1872 Law has led to the passage of significantly different bills by the House and Senate, in the 103rd Congress, that directly and indirectly would raise the cost of existing and prospective hardrock mining on Federal lands. It appears that designers of change in the law are striving for, or are acceding to, an increase in the explicit price charged by the Government for access to Federal lands. Royalties and maintenance, or holding, fees are the chief means selected toward that end. Generally accepted economic principles hold that each should be part of an overall system of payments for use of the land, sharing of risk, and removal of resources. The bills passed by the respective chambers would impose much different degrees of added cost and Federal control of access, with the difference stemming mainly from a greater royalty charge and greater environmentally-related restrictions in the House bill. Both bills, however, would change the economies of hardrock mining on Federal lands by raising the cost of existing and prospective operations. Such mining would become less attractive than without the changes. Consequently, U.S. firms probably would tend to mine more on non-Federal lands and abroad. In the short run, profitability would tend to suffer as a result of higher costs; but it would tend to return to its prior level in the long run, other things being equal. The hardrock mining industry constitutes a small portion of the U.S. economy in terms of value of output and persons employed. But, because a large portion of the industry's activity takes place on Federal lands, and other industries' output directly and indirectly goes into the delivery to final use of a dollar of hardrock minerals, there is concern that measures that impose added costs on mining operations would make some mines uneconomic, resulting in lower production, fewer jobs, and reduced economic activity. To the extent that present hardrock mining activity would be cut back and/or its duration shortened at a number of locations, employment would be reduced and some communities could lose their main source of income. The economic costs and other disruptions of such local impacts could be severe. [read report]

Topics: Mining

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