Mining Industry Braces For Change As Reform Bill Advances Long-Awaited Legislation Will Help Determine The Future Of Mining In This Country

Crafting a mining reform bill that both the industry and its critics can live with has been tougher than drilling a rock face with a wet noodle.

The past two years, a reform bill has died in committee or been otherwise lost in the rift between mining companies and environmental forces.

With the Republican ascension in Congress, this was supposed to be the year a bill became law. By making it past a conference committee of House and Senate members last week, this year’s bill has gone where no other mining reform legislation before it has gone.

“We’re poised to see things move forward now,” said John Grasser of the National Mining Association in Washington, D.C. “We have a great deal to be pleased about from what the Congress has done.”

Idaho Republican Sen. Larry Craig has been the primary architect of the Republican blueprint for setting rules governing how companies patent public lands and what royalty they’ll pay for the right to do so.

Most of Craig’s provisions are reflected in the current version of reform.

But mining interests are not breathing easily yet.

The House and Senate conference committee agreed last week on major tenants of mining reform within the budget. However, both bodies must approve the reform bill to send it to Clinton.

An earlier attempt by Craig to put some major mining reform bills onto an Interior Department Appropriations bill failed, Grasser said. But if a budget deal can be struck, mining reform could become reality, he said.

In the heat of compromise in Congress, many mining companies fear “loose” wording of patenting rules and mining property rights will do more harm than reform. No reform would be better than bad reform, the industry believes.

“Vagueness and ambiguity in new mining law would have a much greater ripple effect on the industry,” said Ivan Urnovitz of the Spokane-based Northwest Mining Association. “It could do a lot of harm if done wrong.”

The industry likely won’t know whether those concerns are warranted for some time.

The real effect of any mining reform won’t be felt for several years, since current mines and even mine projects now in development won’t be affected by a new bill.

But eventually reform will indelibly change the domestic mine exploration environment. Some miners say for the worse.

“Mining will cease to exist in this country in 25 years if the reform works against us,” said Jim Ivers of Lost Packer Mining Co. of Spokane. Ivers heads the mining reform committee for the association.

The prospect of hunting for minerals in the U.S. remains unappealing for two basic reasons, Urnovitz said.

Uncertainty. The industry continues to fret about implications the new laws on patenting and mine claims will have on the legal rights they have to lands they work. The laws are clear now. Will the new ones be as well?

The patent process transfers use of public land to mining companies. But the cheap fees for such rights have been a frequent target of criticism from environmental groups. Mining companies feel that criticism is unfair.

Often overlooked in the patent land-price debate, they say, are the millions spent exploring and developing properties. Companies can face huge losses if the mine turns out to be a bust.

Hecla Mining Co.’s troubles with its Grouse Creek Mine in Idaho are a prime example of a large investment that didn’t pay off. Hecla took a $97 million charge against earnings because the mine didn’t meet expectations.

Most companies agree the patent reform process needs revision. Local mining leaders such as Hecla CEO Art Brown support amending the patent laws to prevent mining companies from using the process to develop anything other than mines.

Burdensome regulation. Permitting a mine requires millions of dollars and years of patience with dozens upon dozens of government agencies. For many mining companies, the hassle drives their investment dollars to foreign mining hotbeds such as Chile, Mexico and Australia.

Since the early 1990s, Inland Northwest mining companies have heard the siren song of foreign countries eager to bring mining economic benefits.

The movement of mining money overseas typically hinged upon countries passing pro-mining laws that solidified property rights for foreign investors. If acceptable mining reform passes here, local companies say their development dollars may return to the United States.

Spokane-based Pegasus Gold Inc. spends the bulk of its exploration budget overseas, with some allotted for finding more minerals at its current mines here, said John Pearson, director of investor relations.

If palatable mining reform passes, Pegasus may look to do more exploration domestically, he said, even with the regulatory environment as it is.

“I think the two issues (mining reform and the regulatory environment) go hand in hand in what has made the domestic situation the way it is,” Pearson said. “Getting mining reform would be one step forward.”

For Coeur d’Alene Mines Corp., acceptable mining reform would also push some of the $4 million the company spends annually on mine exploration back to the United States The total now goes overseas, said Tony Ebersole, director of investor relations.

Passing a mining reform bill would address the first problem of uncertainty, Urnovitz said. The second, and perhaps larger problem of regulatory burden, won’t change unless the administration changes in the White House.

The royalty poses no threat to current mine profitability. Even if a bill becomes law next year, it won’t become retroactive to current mines.

Also, the bill will likely have a large window for mining companies to “grandfather” projects in the pipeline out of the law. Only mines with patents and claims submitted after the law goes into effect will be subject to the royalty.

Some mining backers fear those future mines developed under the new law may never be built if a royalty pinches their profit margins. It could make overseas mines even more attractive.

“With the royalty, some domestic properties deemed marginal would probably be put on the back burner,” Urnovitz said. “But I don’t see an increase in flight of development money overseas. At worst, it would be a wash.”

Northwest Mining Association members are more concerned with what happens to the land after mining ends, Urnovitz said.

Under the compromise bill, the land would revert to federal control if used for “non-mining” purposes.

The definition of “non-mining” concerns the industry, Urnovitz said. They fear millions of dollars invested in development could be lost if an environmental group files a court challenge to rule activity on public land as “non-mining,” stripping away the patent.

Many mining companies would prefer the rules remain the same. But as Congress inches closer to getting a budget to the liking of the White House, the industry has to prepare for a new set of rules.

, DataTimes ILLUSTRATION: Color photo

MEMO: This sidebar appeared with the story: MINING REFORM LEGISLATION IS STARTING TO JELL The House and Senate Budget Reconciliation committees agreed on several issues of mine reform last week. The legislation is wrapped up in the budget debate, which, as of Friday, had the government shut down. Neither President Clinton nor the Republicans seem to be willing to compromise on a new budget. If they do, the mining reform provisions in the budget deal could become law. Here are the mining reform provisions now on the table: Claim Maintenance Fees: Mining companies pay fees to keep their claims to public land. Under the compromise bill, maintenance fees will be termed “rental fees” and will be payable after the year in which the claim was located. A location fee of $25 is paid in lieu of the first year’s rental fee. Rental fees will be $100 per claim each year through 1998, and after that, $200 a year. Patents: To receive a mine patent, companies will have to pay fair market value for the surface of the land, and will be subject to royalty. Reversion: This has to do with what happens to mines after activity ends at a site. The proposed law states that before or during mining, the secretary of the interior can reclaim title to patented claims if used for non-mining purposes. Within one year after the mining company notifies the secretary that mineral activities and all reclamation is complete, the secretary may reclaim the title for any purpose. Royalty: The latest bill sets royalties at 5 percent after net proceeds for mining company (after all costs of getting materials out of the ground are taken into consideration). The royalty will be waived for those with net proceeds of less than $50,000. The royalty is based on a similar system used in Nevada Abandoned Mines Program: The proposed bill would send half of the royalties collected back to the state to establish an abandoned mines cleanup fund. - Eric Torbenson