Enacted in 1872 : Mine Law Is Pure Gold to Speculators

Mining lore is filled with as many tales of quick strikes as there are nuggets in a sourdough’s dream. But few prospectors can match the real-life story of Anthony Perchetti.

Perchetti, of Tonopah, Nev., made a small fortune off gold claims he staked for $500--and he did it without processing even an ounce of ore.

He simply walked into the Bureau of Land Management office in Las Vegas and used the General Mining Law of 1872 to claim the mining rights to public lands near the town of Beatty--10 sites in 1986 and 17 more in 1988--and announced plans to drill test holes in what was then his land.

The land is Yucca Mountain, where the U.S. Department of Energy recently announced plans to bury nuclear waste.

Government Was Powerless

Perchetti’s borings would greatly complicate that job. But under the mining law, the government was powerless to stop him.

“The DOE determined that the most valid way to deal with the claims was to reach an agreement to extinguish his claims,” said Karen Randolph, Department of Energy spokeswoman. “Perchetti was paid $249,500 on Feb. 24.”

“I was a nuisance because I had the (BLM’s) approval to drill on the site, and that is exactly what I was going to do next,” Perchetti said. “If you’re legal in filing a claim and do everything by the (book), nobody can stop you. The law protects the little man.”

The century-old statute--written before the invention of the telephone, to say nothing of strip mines or environmental laws--does more than just protect the little man. Critics say it cheats the tax man and encourages environmental damage. Miners say it assures abundant minerals at competitive prices.

sh Modernizing the Law

Growing concern about the appropriateness of the pick-and-shovel General Mining Law in an era of satellite-image prospecting is encouraging a congressional debate over how best to reform--or rewrite--one of the nation’s most basic economic and environmental regulations.

It is a debate that will decide the future of the Bureau of Land Management, and with it the future of the vast mineralized area it manages, 572 million acres, nearly one quarter of the entire country.

Meanwhile, increased awareness of how the General Mining Law can be used to reap huge profits from public lands at the government’s expense has sparked an Oklahoma-style rush to stake questionable sand and gravel claims on the fringe of this expanding resort community, Bureau of Land Management officials said.

Five years ago, about 20 active sand and gravel claims were being worked by two local companies. In the past six months, however, several hundred claims have been staked by more than a dozen firms, BLM officials said.

So many claims have been staked that some BLM workers now facetiously refer to their white plastic mining-claim markers as the Nevada state tree.

The idea is to stake a claim under the General Mining Law, buy the land for the cost of a mining claim--from $2.50 to $5 an acre--then do the minimum amount of development required while waiting for the city to grow out to you.

“The speculation here is that where there is development, it’s a tool they can use to make incredible amounts of money,” said Runore Wycoff, the BLM’s Las Vegas-area resource manager. “The mining law is a mess in Las Vegas.”

The avalanche of claims has overwhelmed the BLM’s Las Vegas office, which has seen its staff reduced from 125 to 72 in the past eight years. Wycoff said the combination has produced a “crisis” in her office.

Profits Attract Speculators

BLM will not approve all applications to buy mining claims, but the profits at stake almost beg speculators to try their luck. About 90 miles south of Las Vegas, for example, BLM is reviewing eight gold and silver claims staked about 2 miles from gambling casinos fronting the Colorado River at Laughlin, Nev.

Two Nevada couples jointly filed applications in 1987 to purchase the 1,280 acres covered by the claims, which straddle one of the highways leading to the gambling and resort community. Under the mining law, the land must be sold for $3,200; the General Accounting Office, a branch of Congress, has appraised its value as resort property at up to $33 million.

“The GAO wouldn’t know if it was worth $5 or 10 cents,” said J. M. Cutler of Battle Mountain, Nev., who co-signed the purchase application with his wife, Leola. “If we drill and hit (gold or silver), we certainly intend to work it. After I took all the minerals off it, I could do whatever I want with it.”

Cutler’s partner, John R. Deipenbrock of Fernley, Nev., agreed.

“According to the law,” he noted, “if you file for (title), and show the government you can make a profit on it, they have to give you (title).”

Tom Cook--one of two geologists assigned to check out mining claims in the BLM’s 4-million-acre Las Vegas district--said a preliminary visual inspection of the property failed to turn up appreciable amounts of gold or silver.

“This land is more valuable for development,” he said. “But I cannot say (their mining proposal) is a charade. If I find gold or silver in a marketable amount, I have to recommend that the land be listed for (sale).”

Anyone Can Play

Indeed, the General Mining Law enables anyone to stake a claim on public land for a small fee and eventually purchase the claim and all the minerals it contains for as little as $2.50 an acre. Once in possession, the claim holder can sell the minerals without compensating taxpayers or sell off the land itself at potentially huge profits for real estate developments.

In fact, since 1872, a land mass the size of Connecticut has been withdrawn by miners at what Rep. Nick J. Rahall (D-W.Va.) calls “fast-food hamburger prices.”

Before the current Nevada land rush, the most controversial recent example was in 1986, when BLM was forced to honor 50-year-old mining claims for 17,000 acres of western Colorado oil-shale lands. That land was sold for $2.50 an acre, or $42,500; within weeks, the new owners sold the same property to an oil company for $2,000 an acre, or $34 million.

Most often, those real estate speculators accused of abusing the mining law are small-time operators--sometimes miners whose aggregate business grew into a building-supply company and then branched out into residential or commercial development.

Big corporations can reap their own benefits from the law, critics contend. Former BLM director Frank Gregg, now a professor at the University of Arizona, said the mining law can be used to preempt other laws written afterward to protect the environment and promote conservation.

“The public lands are governed by a very rational system that says we will manage this land for multiple use and sustained yield. Then there’s this wild card that says: nothing you do will interfere with hardrock mining,” he said. “It’s amazing.”

“We get beaten over the head all the time because of the 1872 mining law” and other antiquated legislation, said Roland Robison, the BLM’s deputy director in Washington. “But we didn’t write these damnable laws.”

“The mining law can be boiled down to one phrase or four words,” said one BLM conservationist who asked not to be identified. “Do as you please.”

The law is not quite that liberal, but it is not much more restrictive.

Cyanide Bath

The Bullfrog Mine near Death Valley is an example of what the law means to big companies. Gold ore at the mine will be dug from a huge pit nearly twice as deep as the Statue of Liberty is tall, then drenched in cyanide. Government scientists fear wells used to provide water to the extraction process will suck dry Death Valley’s limited water supply, push an endangered fish species into extinction and threaten other wildlife with death by poison.

The mining company expects to extract $1.3 billion worth of gold and silver while leaving behind enough “waste rock” to build a wall a foot thick and 12 feet high around the Equator. Taxpayers, who own the land, will receive only a licensing fee of less than $100--and, perhaps, the bill for any environmental cleanup job that the company cannot or will not perform itself.

“Congress must consider legislation which would, at least, give the public a fair return for incredibly valuable mineral resources that we are currently, essentially, giving away,” said Johanna Wald, a lawyer who specializes in BLM issues for the Natural Resources Defense Council.

The Bullfrog Mine is only one of more than 100 colossal strip mines in which cyanide is used that have been authorized on public lands in California and Nevada in the last 10 years. Environmentalists complain the mines have been allowed by the BLM despite a lack of hard scientific data on their impact on the environment.

“The BLM has handed the next generation a huge cleanup job and nobody even knows the magnitude of it at this point,” said Philip Hocker of the nonprofit Mineral Policy Center in Virginia. “It is like a savings and loan crisis that involves acres instead of bank accounts.”

Miners, like Roger Nelson of San Francisco-based BHP-Utah International, contend that claims of massive environmental damage are exaggerated and remind critics that the country needs the minerals they are providing.

Still, concern over the mines--and outrage over huge profits by speculators--is prompting a critical reexamination of the General Mining Law of 1872.

Single-Biggest Problem

The law regulates mining claims and allows multinational mining concerns to extract gold, silver and other “hardrock minerals” from public lands without compensating the taxpayers, who own the land. The law is criticized as the one problem most responsible for hobbling the BLM’s attempts to manage public lands properly in the 1980s.

In the 117 years since the mining law was passed, Congress has passed other laws governing oil wells and coal mines--the 1872 law was written before many people realized oil was worth pumping out of the ground. Now, the fuel-mineral rights to public lands are leased at a fee to developers, thereby bringing the government substantial income.

Other adjustments also have been added piecemeal over the years, excluding, for example, minerals on the ocean floor or in parks and designated wilderness areas.

But efforts to fundamentally rewrite the mining law--and, for example, let taxpayers share in the profits reaped from the gold, silver and other minerals on public lands--have been frustrated by elements within the mining industry, led by the influential American Mining Congress.

“We are opposed to any changes in the law,” said Keith Knoblock, American Mining Congress lobbyist in Washington. “Our fear is if it is opened up, we’ll end up with a mineral-leasing system for hardrock mining.”

That, he asserted, probably would not benefit taxpayers as much as it would make it harder for small miners to compete with multinational companies.

Work With Environmentalists

Others in the industry are less dogmatic. Several leading mining companies, such as Homestake Mining Co. and BHP-Utah International Inc., are working with environmental groups and others to try to draft a modern mining law.

“Gold mining is . . . making money and we ought to be sharing the revenue,” said Homestake Vice President Bob Reveles. “But getting an entire industry to go along with that is difficult.”

Early drafts of the study group’s proposal keep some current elements, such as the right of any citizen to prospect freely on public land, while changing such provisions as the security of tenure and patenting, or title, procedures that sometimes have been abused by claim jumpers and real estate speculators.

Congress also is seeking to modernize the mining law. A proposal called the Exploration and Mining Act of 1989 is being prepared in the House Interior subcommittee on mining and natural resources. As with other proposed revisions, this would require neither royalties nor leases because of what one staff member said would be the trouble in determining a fair share of the many minerals bunched together under the “hardrock” definition--minerals ranging from manganese to molybdenum to cobalt to gold.

“We don’t think it’s cost-effective for the government to be administering leases for all these myriad of minerals,” said one congressional staff member helping to outline the proposed mining law. “What we want instead is a rental (fee per acre). It’s simple, straightforward, and easy and cheap to administer.”

What is uncertain about either proposal is whether they will cover the environmental effects of modern mining techniques not dreamed of in 1872.

There is, for example, the environmental impact of cyanide heap-leaching, a process in which heaps of low-grade ore are bathed in a weak cyanide solution. The cyanide solution dissolves the microscopic flecks of gold, which are later separated from the cyanide.

This process, which makes it profitable to mine ore so low in gold content that it was discarded as waste rock by earlier generations of miners, has led to the current “gold rush” in Nevada and California.

But environmentalists--and, increasingly, state officials--are alarmed by leaks of cyanide into desert soils, and by the number of waterfowl poisoned by drinking from huge cyanide-laced tailings ponds, or waste-rock storage areas.

Eldon Hughes, chairman of the California Desert Protection League, said the mining law is “a permit to search and destroy.”

Birds Poisoned

The Audubon Society is afraid that the tailings pond at the proposed Castle Mountain Mine in Nevada would be the largest source of water for miles around--and a tempting rest stop for migrating birds. Thousands have been poisoned over the last four years at similar ponds in Nevada.

Other organizations, including the Wilderness Society, worry about the water required by the mine. Pumping out billions of gallons from desert aquifers, or underground lakes, could exhaust the only perennial spring in the eastern Mojave Desert, a valuable wildlife habitat.

A similar future could be facing the Devil’s Hole pupfish, an anachronistic legacy of the time millions of years ago when Death Valley lay hidden beneath a glacial lake. National Park Service scientists fear the Bullfrog Mine may dry out the one place on Earth where the tiny fish survive. Mine operators deny any threat and have offered to monitor local ground water to prevent problems.

Most conservationists are satisfied with the company’s monitoring plan, but many resent the BLM for approving the mine without seeking such assurances itself. It is, they argue, typical of the agency’s tendency not to anticipate problems.

The BLM, however, usually is too busy with present problems to look much into the future. Short staffing, for example, has left BLM with only two staff geologists to contend with the Las Vegas-area’s mining boom.

One of the geologists, Tom Cook, said the problem is aggravated by the many suspicious small claims being filed for “uncommon” sand and gravel. Uncommon minerals can be mined free of royalties under the General Mining Law; “common” varieties were excluded from the law in 1955.

“If they get in operation and use the magic word ‘uncommon,’ they can just keep going,” Cook said.