In this episode, we explore the inexplicable gold giveaway that the 18th President of the United States signed into law to incentives the development of the west. Ulysses S. Grant signed the General Mining Law of 1872 into law. He thereby set the royalty rate on the sale of publicly owned minerals like gold, silver, copper, and uranium at ZERO. That’s right, ZERO.  This outdated and still operable law continues to allow precious metals to be mined and profited from without compensation to the resource owners, federal taxpayers. So how much lost taxpayer revenue are we talking about? Over the last decade … approximately two billion dollars. Joining Steve Ellis to dig deeper is TCS Research & Data Analyst, Mia Huang and TCS Vice President Autumn Hanna.

Read more on the subjects discussed in the episode:

• Hardrock Mining on Federal Lands

• Letter to Members of Congress on the General Mining Law of 1872

Listen here or on Apple Podcasts

Episode 21 – Transcript

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place. For over 25 years, TCS, that’s Taxpayers for Common Sense, has served as an independent, nonpartisan budget watchdog group based in Washington, DC. We believe in fiscal policy for America that is based on facts. We believe in trans and accountability because no matter where you are on the political spectrum, no one wants to see their tax dollars wasted. So avert your eyes and let your ears help soften the blow because today Budget Watchdog, AF faithful, we come on the air with a sad, but also true story of waste that has been harming taxpayers for one and a half centuries. That’s 150 years, folks. Today we explore the inexplicable gold giveaway that the 18th president of the United States signed into law to incentivizes the development of the West. Ulysses S. Grant signed the General Mining Act of 1872 into law, and thereby set the royalty rate on the sale of publicly owned hard rock minerals like gold, silver, copper, and uranium at zero.

Steve Ellis:

That’s right, zero. This outdated and still operable law continues to allow precious minerals to be mined and profited from without compensation to the true resource owners, federal taxpayers. So how much lost taxpayer revenue are we talking about? Over the last decade, approximately $2 billion. Joining me to dig deeper here, is TCS research and data analyst, Mia Huang, who has been digging into the weeds of this anachronistic law. And Budget Watchdog, AF podcast OG TCS VP, Autumn Hanna, who’s with us here, when we actually passed bipartisan reform of the law in 2007, only for the Senate to squelch it. We’ll get into more of that later. Welcome to the podcast, Mia and Autumn.

Mia Huang:

Happy to be back, Steve.

Autumn Hanna:

Glad to be here on this noteworthy anniversary, Steve.

Steve Ellis:

Great and thanks for being here. And speaking of being here, thank you Budget Watchdog, AF listeners. And new for this podcast coming up at the end of the show, we have an exclusive tease for this week’s Weekly Wastebasket. Stick around to the end. You don’t want to miss it. Let’s start with some of the fundamentals of this law before we get into all the politicking and failed reform attempts. Mia, can you get us up to speed? Why is the royalty rate for the sale of oil, gas, and coal so different than what hard rock mining companies get on gold, silver and copper?

Mia Huang:

So basically, the idea, a century and a half ago, was to entice people to go and settle the West. And that’s exactly what the General Mining Law of 1872 did. It gave free and open access to federal lands to almost anyone, if they wanted to go explore and extract mineral resources. But over time, Congress instituted separate systems for oil, gas, coal, and other basic materials, like sand and gravel, which all pay royalties generally around 12.5%. But hard rock minerals aren’t covered by these subsequent laws. So hard rock mining companies, to this day, don’t pay a single penny of royalty.

Steve Ellis:

Well, I guess you could say, I mean, free gold is quite the enticement to settle the West.

Mia Huang:

Exactly. We can all agree that was accomplished more than a century ago, but lawmakers still haven’t updated the law.

Steve Ellis:

Well, I guess mining companies, like how lawmakers have dealt with zero royalty rate. In fact, lawmakers approach reminds me of Ron Popeil of Ronco infomercial fame, and the one rule of his rotisserie oven, “Set it and forget it”. I think I can hear your groans, podcast listeners. So let’s get back down to brass tax. See what I did there? Brass is an alloy of copper and zinc, no royalty due. I promise that’s it. Back to the facts. How much money have taxpayers missed out on by not updating the Mining Law of 1872, Mia?

Mia Huang:

The problem is we don’t know, Steve. Both the quantity and the value of hard rock minerals extracted from federal lands every year remains a mystery because there is no reporting requirement for hard rock claimants. If you don’t pay royalty, turns out you don’t need to report how much resources you extracted from public lands either. The federal government knows the annual production value of other minerals, or even timber on federal lands, but not hard rock minerals. The Feds even know the annual production value of apples, bananas, cucumbers, dates. I can go down the entire alphabet list. But it has no idea how much taxpayer owned gold or silver is being mined. That’s just nuts if you ask me.

Steve Ellis:

Do we really have no idea? Is there some proxy to get an idea of scale or scope? I mean, we know it’s not nothing.

Mia Huang:

Right, we do have some estimates for how much potential revenues taxpayers missed out from states that are cashing in on gold and other mineral mining in their states. Using data collected from just Nevada and Colorado, the Department of the Interior estimated that hard rock minerals worth upwards to $34 billion were removed from federal lands in those states between fiscal year 2013 and 2019, which is an average of $4.9 billion a year. The most specific data we have is on the production of gold on federal lands in Nevada. According to Nevada Division of Minerals, an estimated value of $38.4 billion worth of gold was produced from federal lands in Nevada from 2011 to 2020. If just a 5% royalty rate had been in place, taxpayers could have gotten up to $1.9 billion over the last decade. And according to Government Accountability Office, Nevada gold operations represent just 12% of all authorized hard rock mines on federal lands in 2018. The total amount of revenues taxpayers could have received, if royalties have been collected on all hard rock production, likely costs more than $1 billion per year.

Steve Ellis:

Billion a year. That’s quite a bit. And it isn’t just about money that taxpayers would pocket, right? Because I understand there are enormous abandoned mine problems that are created for these communities where the mines are actually operating. A royalty could help deal with those abandoned mines. Don’t we need a revenue stream to tackle the other liabilities that abandoned hard rock mining on federal lands created for taxpayers over the last 150 years?

Mia Huang:

You’re right on. So not only does the 1872 Mining Law give away valuable minerals for free. It also only provided a very skeletal structure for federal management of hard rock mining, and it did not include any provisions for cleanup of federal land after mining activities seized. It wasn’t until 1981 that the Department of Interior finally adopted regulations requiring reclamation. But at that point, we already have a legacy of abandoned hard rock mines. In 2020, the Government Accountability Office identified about 114,000 abandoned hard rock mines on federal land. And there could be another 390,000 abandoned mine features that haven’t even been counted yet. And at a hearing last week, the Interior Deputy Assistant Secretary, Steve Feldgus, said there could be more than 500,000 abandoned hard rock mines on federal lands.

Mia Huang:

The problem is, abandoned mine lands are detrimental to both health and safety and they have to be cleaned up. In total, four federal agencies has spent $2.9 billion to reclaim abandoned hard rock mines between 2008 and 2017. And that worked only attracts a fraction of sites that needed to be reclaimed. Without a meaningful revenue stream from our hard rock royalty, taxpayers will have to continue to spend hundreds of millions of dollars a year to clean up liabilities that are left behind by the hard rock industry to begin with.

Steve Ellis:

Wow, a half a million abandoned mines. That’s a lot of reclamation and then we don’t even have the cash. We haven’t generated the royalties to actually deal with that. Thanks for laying that all out there, Mia. We clearly have a hard rock problem. One, we’re giving away gold and silver and more. And two, we have this massive abandoned mine problem that we were just talking about. How could this loss stay on the books for 150 years? I know Autumn has some firsthand experience with attempts to reform the law. So Autumn, can you please give us some high level view on how this giveaway is still around? We’re celebrating its sesquicentennial this year and yes, listeners. I wanted to be able to say that on the podcast. So, Autumn.

Autumn Hanna:

Autumn, Steve. It pains me to even have to answer this question about how this law can still be on the books. I’ve been working on this issue longer than I care to admit. I really didn’t expect to be calling for reform on the law’s 150th anniversary. There have been many attempts at reform, some of which I have been really involved with. And even before me, our co-founder [inaudible 00:09:38] in the 1990s, was working on reforming the hard rock mining law. So many bills have been introduced over the years to reform the law. Most of the efforts that have been successful, or at least headed on a track of success, I’ll talk later about how we got pretty far, but then didn’t quite cross the finish line. And most of those efforts were looking at reforming this claim patent system that we’ve been discussing.

Autumn Hanna:

And it’s just, not only are we not charging this royalty, another really egregious part of this law is this claim patent system where you can just claim land for $5 an acre or less. And then in the 1980s, we had this rampant problem where people would turn around and sell that land for huge profit to become ski resorts and other developments. So the public is losing dramatically on lands that are supposedly going to be developed for hard rock. But then the claimant is able to patent, which means own the land and sell it for huge profit.

Steve Ellis:

I think this is an important point. I mean, patenting, it’s such a euphemism. I mean, it sounds like, “Oh, we created a new widget.” Or “Hey, in the 1870s, for instance, you had the phonograph, the light bulb, those were all patented in that time.” And so it’s just kind of crazy that this is really about ownership of the land of public land and that they are staking a claim and then some cases flipping it. And I believe Keystone ski resort, it was one of these patents. Originally. A mining patent that is now a incredibly profitable ski resort in Colorado.

Autumn Hanna:

Colorado. That’s right. I mean, and this abuse became sort of publicly known. And as I was saying in the 1980s, and we have had a moratorium each year that has to be renewed on this patenting and it’s something that needs to be permanently addressed. So that is one of the things that has been key in these reform bills that we have seen is permanently ending this patenting of land cause there has been recognition that it was so egregious. But we still haven’t done it and any year it can lapse. So it is important that we take care of that problem.

Steve Ellis:

And just to underscore, Autumn, too. I mean, so 1994, so you’re talking about President Clinton had to do it every year. President Bush had to do it every year. President Obama had to do it every year. President Trump had to do it every year and now president Biden. And the thing is that, if any one of them just lets it lapse all of a sudden they could be patenting this land, claiming this land for five bucks an acre.

Autumn Hanna:

It is crazy. And the fact that we haven’t got it done yet is mind boggling to me. So reforming the claim patent system has been one of the sort of main ways that legislators have gone on to tackle 1872 reform and sort of drafted proposals to do it through reforming that. Other reforms have focused on making hard rock a leasing system like oil and gas and coal, which makes a lot of sense. We’re one of the only countries in the world that doesn’t lease our hard rock minerals. No matter the way the proposal would get reform done, all have included a royalty on hard rock mineral production ranging from 8% to 12.5% for new hard rock mining operations. Although, some legislation made it past committee, most of that stalled. But in 2007, we had a huge victory under, then House Natural Resource Chairman Nick Rahall of West Virginia, who led bipartisan legislation, which passed the house. You should remember that, Steve. You testified on that though.

Steve Ellis:

I do remember that. The fireworks between the two sides at that hearing makes it indelible. I have the scars.

Autumn Hanna:

Well, then you also know that unfortunately, after our big win. Reform stalled in the Senate, largely at the hands of, then Majority Leader Harry Reid. See, how we mentioned it, Nevada earlier and all that data that Mia’s been looking at, that’s because Nevada has a lot of gold. So much so that the state is even cashing in on lucrative gold, but federal lawmakers have still been hesitant to make any changes to gold mining and other hard rock mining operations that would affect federal lands in the state.

Steve Ellis:

At that hearing back in 2007, I remember that, then Congressman Dean Heller, who was also from Nevada, calling me free gold guy, because I dared talk about how mining companies were getting gold for free.

Autumn Hanna:

I do remember that happening and I was glad to not be the one testifying that time. I will say taking it to present day. This year, we saw a new life when the house passed Build Back Better and it included royalty provisions on hard rock mineral production from federal lands. Aiming to raise approximately a hundred million dollars in new revenue towards abandoned mine cleanup. Many of us know that bill, the Build Back Better bill, that is stalled in December. Before that happened, though, I testified on reform options in October at a hearing before the Senate Energy and Natural Resources Committee, as they were looking at provisions to add to Build Back Better in ways to get reform done. And Chairman Manchin was really supportive of the idea of reform and in that powerful position that really matters. And he’s coming from a cold state, just like past Natural Research Chairman Rahall did, years back over a decade ago when we first got that bipartisan reform passed.

Autumn Hanna:

So it’s really important for a lawmaker like Chairman Manchin because a state like West Virginia, where they have a lot of coal, they are paying royalties on that coal. And as we’ve mentioned throughout the podcast oil, gas, coal, these are minerals that are charged royalties. Now, it’s a whole nother issue if they’re paying enough in royalties, which we know are below market, which we talk about on many other podcasts. So I won’t get into that, but nonetheless, those companies are paying royalties for getting those energy minerals off federal lands. And so we were really excited at the prospect of getting reform done, having Chairman mansions support.

Steve Ellis:

But it didn’t come to pass unfortunately. But Autumn, I do recall also that there are some signs of life at this administration and proposals there. I mean, we did something in the budget about this, right?

Autumn Hanna:

We did. And there has been some movement at the administration. In the budget this year, the Biden Administration has an honor of the 150th anniversary, created a committee to look at reforms, an inter agency working group. And it’s supposed to look at hard rock mining, permitting and oversight on federal lands and get to the royalty issue and discuss all these components of reform and bring a bunch of stakeholders together, including taxpayers. So we will be following that process and we’ll be commenting along the way, raising all of the concerns we’re discussing today and more in our all of the research and writing and reporting that we’ve been doing on this issue for more than two decades. And another positive movement was last week, we saw the House Natural Resources Committee have a hearing in honor of the 150th anniversary as well.

Autumn Hanna:

And they brought Deputy Assistant Secretary for Land and Minerals Management, Steve Feldgus, to the table to talk about reform and what the administration is doing in the need for reform. And a lot of good points were made at that hearing about how taxpayers are losing and what the administration plans to do. And there was good discussion about the tribal interests and the mining companies and how there can be reform that benefits everyone really. And that was something we were commenting on throughout the hearing. And we have a great [inaudible 00:16:43] take on the hearing and a new fact sheet and some other materials on the website that really get to some of this latest push. Chairman Grijalva introduced a bill for reform, so we have another bill out there. We also have Senator Heinrich, who’s introduced a companion bill in the Senate and the discussion is still happening. This anniversary gives us another opportunity to talk about reform. So we’re using that, but whether or not we’ll be able to see any action, legislatively happen this year seems like a far reach.

Autumn Hanna:

It’s been hard to get anything done, we know legislatively. And so I don’t hold out a lot of hope that we’ll get something through Congress right now. But we will use this opportunity to push on Congress and also this new opportunity at the administration to raise our many concerns and engage in that process. So stay tuned.

Steve Ellis:

Absolutely. And podcast listeners, you can just go to taxpayer.net to find out all these materials. I think that hearing was what Mia also referred to where Deputy Assistant Secretary mentioned about the possibly 500,000 abandoned mines. It’s one of these things that once you first learn about this gold giveaway, it’s just staggering to think about it. So podcast listeners, as promised at the top of the show, here’s a preview of this week’s Wastebasket for our faithful Budget Watchdog, AF listeners. This week’s Wastebasket details efforts by the military services to retire outdated weapon systems. For years, Congress has blocked any move to retire legacy aircraft and ships, even some that are not so old, but are huge lemons like the literal combat ship. But Congress is pushing aside strategy for purely parochial reasons to keep these assets in their districts and the station there. So the Wastebasket, thanks for the legacies, lays out our argument for fiscal sanity over local parochial politics. All right, before we go, we covered a lot of ground here. Autumn, Mia, do you have anything to add?

Mia Huang:

Of course. So I would like to point out that, as we’ve mentioned multiple times, not only is there lack of parity between other mineral resources like oil, gas, and coal, which pay some form royalty and hard rock minerals do not. There is also a huge discrepancy between how states and federal government manages hard rock minerals. It’s just crazy that western states, like Nevada and New Mexico and Colorado and so on, all charge some form of royalty on their hard rock minerals, but federal government, next door, essentially, for the same plot of land, gets nothing.

Steve Ellis:

And that’s a former Colorado resident pointing that out. Right, Mia?

Mia Huang:

Exactly. That is wild.

Steve Ellis:

All right. Autumn. Anything to add?

Autumn Hanna:

I mean, I think Steve, it’s important to know that the public overwhelmingly supports reforming the 1872 Mining Law as well. And we’ve talked a lot about the legislative work and how egregious this law is. But one thing is that the public really understands this, despite the inability of Congress to get this across the finish line, we actually commissioned a poll in 2020 because we knew that the public had been concerned, but we really wanted to see how strong that support was. And what we found in that poll, was that 83% of likely voters agreed that the landowners in this case taxpayers on federal land should receive royalties where valuable minerals are found. And that is something that I think is really easy to understand that we’re just letting companies come in, international mining conglomerates. Companies like Rio Tinto, come in, Barick gold, others that are internationally connected and profit off of really high prices of gold and make a lot of revenue on that while taxpayers get nothing.

Autumn Hanna:

And that’s something that I think that the public, unlike, I think a lot of tax and budget issues where it’s a little harder to grasp, this is one giveaway that everyone agrees needs to be fixed. And we’re really hoping that, well, I am in particular, but I think all of us now, and Mia for sure are hoping we don’t have to join you for the 151st anniversary to discuss reforming the law. Maybe the country can get this right, that our lawmakers can work in the interest of the public, pass a royalty, get reform done and stop the free gold giveaway.

Steve Ellis:

Autumn, isn’t the case that these for known companies, they just pack up stakes and leave these abandoned mines or fold, essentially that’s one of the issues as well, right?

Autumn Hanna:

Well, certainly it’s been a problem in the past and we have this huge abandoned mine problem as Mia really highlighted. And so getting a revenue stream through a royalty to address that abandoned mine problem is hugely important. I mean, we need the revenue for a lot of important priorities that need to be done. And this hard rock mining problem is directly tied to the fact that we’ve been living under this really outdated law that just allowed for these operations to come in, mine, profit, make great profits, in fact, and then leave us taxpayers with the mess to clean up. So charging a royalty and getting that money from industry is something we have to get done.

Steve Ellis:

Really outdated law seems like an understatement for something that’s been around for 150 years and relatively unchanged, certainly on the royalty part of it. And I remember from the pollsters, when they presented it to us, they said that they were struck by the fact that it was bipartisan. They said that they hadn’t seen anything that had a little bit of controversy to it, that had such high levels of support by Republicans, Democrats, and Independents across the board.

Autumn Hanna:

That’s right. I mean, it really is an issue that can have bipartisan support, has had it in the past. This is something that everyone I think can see how this is wrong and that this giveaway needs to stop, and we did. We saw that in the polling, it was overwhelming how strong the support was across party lines.

Steve Ellis:

And that’s because it doesn’t make sense podcast listeners. So it seems like reforms should be within reach. Thank you, Mia, and for all your insights today and Autumn for your insights and sharing some of those battle scars. Well, there you have it, podcast listeners it’s time for Congress to stop the egregious giveaway and ensure taxpayers receive a fair return for the gold, silver and other precious metals we all own. It’s time to enact a royalty, permanently end the claim patent system and reduce hard rock cleanup liabilities. It’s been 150 years in the making. Just to put this into perspective. In 1873, the year after this bill was enacted was the first successful train robbery by Jesse James.

Steve Ellis:

Just to give you a little idea of what we’re talking about here. This is the frequency market on your dial, subscribe and share, and know this, Taxpayers for Common Sense has your back America. We read the bills, monitor the earmarks and highlight those wasteful programs like the Mining Law of 1872 that poorly spend our money and shift long term risk to taxpayers. We’ll be back with a new episode soon. I hope you’ll meet us right here to learn more.