The Mining Law of 1872: Is it Worth Saving?

Interview


Q. Why did you write about the Mining Law of 1872?

Gerard: The Mining Law was the subject of my doctoral dissertation at the University of Illinois. I was interested in environmental issues, and mining has short and long-term environmental implications. I also think that the Mining Law provides excellent examples of how laws and regulations shape incentives of interest groups - for instance, mining firms and environmental groups - as well as for public officials.

Q. What was your view of the Mining Law of 1872 when you started your research?

Gerard: It seemed kind of absurd to me that a contemporary of the Homestead Act was still in place.

Q. What is your view of the Mining Law of 1872 now?

Gerard: That is a really complicated question. Security of property rights is necessary if firms are to commit resources to projects that have long time horizons, and the Mining Law is superior to many other systems in this respect. There is also a complex web of common law and environmental regulations at various levels of government. So the Mining Law is only a part of the system of rules that govern mining on the public lands.

Q. Many environmentalists want to reform the mining law because it doesn't have provisions to protect the environment. What do you think?

Gerard: As environmentalists point out, the Mining Law contains no environmental-protection measures. Of course, mining is subject to federal regulation through laws such as the Clean Air Act, the Clean Water Act, and the National Environmental Policy Act, in addition to administrative regulations from the land-management agencies (BLM and the Forest Service), and state or local regulations. BLM and the Forest Service, and the EPA are responsible for enforcing these regulations.

So criticisms of the environmental protection measures are generally directed at the shortcomings of these laws and the enforcement capacities of these agencies. Many of these criticisms draw on past damage as a reason to implement tougher environmental standards, yet tougher environmental standards have been enacted. For instance, firms were not required to reclaim sites on BLM lands until 1981, so it is not surprising that there are abandoned mining operations on BLM land. A more appropriate question would be to ask whether firms subject to these 1981 requirements have, in fact, successfully reclaimed their operations.

Others have argued that the current structure often provides disincentives to clean up old sites. This is clearly an area where reform advocates should look if their goal is to promote a cleaner environment.

Q. Many others think that the law is bad because we are virtually giving away our public land. What do you think?

Gerard: There are two issues here. The first is that firms can acquire outright title to federal land at prices that Congress established in 1872. This turns out to be a pretty good deal for those who can acquire the land, and the current secretary of interior likes to showcase these incidents. For instance, in 1993 American Barrick paid $10 thousand for federal land in Nevada containing $10 billion worth of gold. This, of course, was an exceptional case. In general, individuals and firms that look for minerals don't find anything, and never acquire title to the land. Today there are more than 300,000 claims on federal land in the West, and my guess is that most of these will never be profitably mined. In fact, the land American Barrick acquired may well have been worth just about $10 thousand if the company had not gone through the trouble to find the gold and develop a means to extract and process it. Overall, there are more than a billion acres of land in the western states and Alaska, and only about four million acres of those have been privatized under the provisions of the Mining Law. That much acreage changed hands under the Homestead Act in 1890 alone.

The second issue is that firms do not have to pay federal royalty taxes, whereas almost all federal, state, and local agreements require some form of royalty. I really don't have any thoughts on what the "appropriate" level of such a royalty would be. It is important to note that there will be less domestic mineral exploration and development when a royalty is enacted.

Q. Do you see some places where the law could be reformed?

Gerard: I think there are some places where the system can and will be changed. As I mentioned, it would be a fairly straightforward enterprise to levy a royalty and raise the price of land title. I also think that we should think about how current environmental regulations affect incentives of state agencies and the mining industry before we look to add another layer atop this structure. Such changes would not affect how mineral rights are transferred from public ownership into private hands.

David Gerard received his Ph.D. in economics at the University of Illinois at Urbana-Champaign. The PERC Policy Series "The Mining Law of 1872: Digging a Little Deeper" is based on his dissertation

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