Published in The Enterprise, 2-16-98

The Mining Law of 1872: The Mother Lode of All Corporate Welfare

by Rocky Anderson

One hundred twenty-six years ago, Ulysses S. Grant signed the Mining Law of 1872. He sought to encourage people to settle in the West and mine such hard rock minerals as gold, silver, platinum and palladium. Those were the days of rugged prospectors seeking to trap minerals in tin pans and hit pay dirt while swinging their pickaxes.

The Mining Law of 1872 made terrific sense. It allowed anyone during those frontier days to drive four stakes into the ground on Western lands owned by the federal government, marking the four corners of a 20-acre tract, then file a hard rock mining claim on those 20 acres. A miner could own as many claims as he or she staked out so long as a minimal payment was made annually for each claim. Further, miners were not required to pay any royalties for the right to extract minerals from the public lands.

The 1872 law also gave miners the option of buying the public lands for between $2.50 and $5.00 per acre if the claimsholder could prove that the claim contained commercially producible hardrock minerals.

But times have changed. And the Mining Law of 1872, which is now essentially identical to the legislation signed by President Grant, has become perhaps this nation’s greatest symbol of taxpayer abuse, Congressional stupidity, and corporate greed.

As Sen. Dale Bumpers (D-ARK) has noted in the January-February 1998 issue of Washington Monthly (reprinted in the February 1, 1998 issue of The Washington Spectator), multinational corporations have replaced the prospector of the 1800s and are reaping billions in profits because of the benefits flowing from the Mining Law of 1872 — all to the detriment of United States taxpayers. What are the consequences in the 1990s of the 1872 mining law?

  • Although they pay extraction royalties averaging approximately 5% when they mine on private lands, mining companies that have staked out federal lands do not pay a nickel for the extraction of billions of dollars worth of minerals each year. The avoidance of extraction royalties by these huge, highly profitable corporations costs taxpayers more than $100 million annually.
  • The purchase of federal lands for $2.50 to $5.00 per acre under the 126-year-old law has resulted in the “patenting” of 3.2 million acres of public lands, with an estimated $243 billion worth of hardrock minerals. Because the statute does not require that the land be mined after it is purchased, patented claims have become vacation home developments, casinos, golf courses and other non-mining enterprises- all heavily subsidized by taxpayers.
  • To make matters even more outrageous, mining companies are permitted to take tax deductions on the value of minerals extracted from the lands purchased at $2.50 to $5.00 per acre. According to Sen. Bumpers, this boondoggle costs taxpayers an additional $100 million or so each year. In effect, our federal government not only gives billions of dollars worth of minerals to some of the wealthiest corporations in the world, but, through tax deductions, pays them to take the minerals.
  • As a final insult to American taxpayers, mining companies often leave as their legacy huge environmental disasters, threatening the health of our citizens and costing our federal government billions to clean up after the pillaging has taken place.

Just consider the examples offered by Sen. Bumpers in his recent Washington Monthly article:

  • “Just four days after the Senate voted 50 to 48 to defeat [Bumpers’s] patent moratorium amendment in 1990, the Stillwater Mining Company filed applications for patents to 2,000 acres of national forest land in Montana. For just $10,000 Stillwater will gain title to land containing platinum and palladium reserves worth more than $35 billion.”
  • “In 1989 an Oregon family patented 780 acres of land containing silica in the National Dunes Recreation Area for $1,950. Shortly after the patent was issued, the Department of Interior decided the land, which attracts more than 2 million visitors a year, should not be mined and sought to buy back the land. The new owners offered to sell the land back – for $11 million.”
  • “In 1994 Barrick [Resources, a Canadian corporation] obtained patents on more than 1,800 acres of public land in Nevada. In exchange for approximately $9,000, what did Barrick get? More than $10 billion worth of gold – one of the largest deposits in U.S. history.”
  • “In 1986, Summitville, another Canadian mining company, opened a gold mine in Rio Grande County[, Colorado]. In June of that year, a pad and protective liner at the site failed, allowing cyanide to seep into the ground. Summitville?s parent company subsequently declared bankruptcy, leaving only a $4.7 million bond for reclamation. . . . [T]axpayers are, at this moment, spending $33,000 per day to prevent cyanide from spilling into the headwaters of the Rio Grande. Before the clean-up is complete, taxpayer costs are predicted to reach up to $60 million.”

Sen. Bumpers has sought for nine years to reform the Mining Law of 1872, but has faced fierce opposition by those who receive huge contributions from coal and mineral mining industries and by Western-state senators who have repeatedly used archaic Senate rules to block all efforts to reform this horrifically outdated law.

This shameful giveaway of our nation’s resources will end only when the voters let Congress know that we will not stand for such reprehensible paybacks for campaign contributions. As Sen. Bumpers notes in his Washington Monthly article, “It is long past time to start treating the taxpayers with respect rather than contempt. It is time to chisel the 1872 Mining Law out of the U.S. Code and send it to the Smithsonian Institution museum where it belongs.”