You’ll Find Welfare in Them Thar Hills
Welfare saps initiative, right? Generation after generation, it creates a culture of dependence.
Sure. Doubters need only look to the minerals mining industry, a business so addicted to government handouts that it apparently can barely lift a shovel without taxpayer help.
California is having a second great gold rush. It’s a leader in boron and gypsum too, producing $3 billion a year in non-fuel minerals overall and ranking second only to Arizona. But the interesting thing about minerals mining is how perfectly its checkered history recapitulates much of what ails American business.
Here was a mighty industry built on dazzling natural abundance and unbridled domestic growth. It was blessed with sweetheart legislation and enjoyed a degree of worldwide pre-eminence. But it resisted innovation, relying instead on its ability to extract private profit at public expense, especially by ignoring the cost of the environmental degradation that it had a habit of leaving behind.
Times got tough in the early 1980s, and the industry was brutally restructured. The result, nowadays, is a scaled-down but profitable $30-billion-a-year business that seems to lack the will--and possibly the wherewithal--to invest in its own future.
That’s a shame. In California, tougher environmental rules and lower-grade ores will increasingly demand higher technology, but the minerals and metals companies aren’t likely to have it.
“Expenditures for internal and contracted R&D; declined from $133.5 million in 1980 to $22.5 million in 1988,” says the startling new report of a special panel commissioned by the National Research Council, which advises the government on such things. By contrast, federal spending on mining research--excluding safety--was $86 million in fiscal 1989. Ray Beebe, vice chairman of the panel and an astute senior vice president at Homestake Mining Co. in San Francisco, adds: “Much of the technology in use today was already on the shelf in the late 1950s.”
Take gold. California’s 1989 output was $367 million, second only to Nevada’s. Our gold boom has been abetted by U.S. Bureau of Mines research into “heap leaching”--soaking pulverized rock in cyanide to extract the ore. The technique is so cheap that it can pay to mine 20 tons of rock for one ounce of gold, and it was developed partly at taxpayer expense when gold was cheap. But the U.S. gold mining industry probably spends less than $7 million of its own on research and development annually.
What’s the solution? More public assistance, of course. The study panel recommends greater cooperation between government, universities and mining companies to make the technological leaps the industry so badly needs.
But the panel didn’t flatly recommend the most obvious thing of all: that mining companies spend more on research.
Given the industry’s history, that omission is perhaps less than startling. Corporate welfare is practically second nature to these folks. Much of American minerals mining occurs on federal land, and thanks to a classic government giveaway, mining interests pay Uncle Sam nothing for the ores they extract.
The mining law of 1872, drafted and guided through Congress by mining industry mouthpiece and Nevada Sen. William Morris Stewart, lets miners reap minerals on federal lands for free. Not only that; if a miner or mining concern really likes a tract, they can buy it, for $5 an acre or less.
Traditionally, miners took the ore and left behind a mess, but when the land is worth keeping, they take it. Reviewing 20 such deals since 1970, the General Accounting Office found that the government got less than $4,500 for lands valued in 1988 at $13.8 million to $47.9 million. Predictable horror stories include the giveaway of federal lands in suburban Phoenix and Las Vegas and next to ski resorts.
In 1985, miners paid $170 for 34 federal acres near Sonora, Calif., in Gold Country; local realtors figured the land was worth perhaps $510,000. Since 1872, a combined area larger than Connecticut has been ceded this way nationwide.
U.S. land and mineral giveaways have historically characterized settlement of the West, but by now the government gets decently paid for oil, gas, coal and timber from its-- our --land. Nor does it routinely cede title without charge.
Gold, copper, gypsum and other such minerals remain the great exception. Nobody seems to know what proportion of mining revenue is drawn from federal lands--a group lobbying to change the law guesses $4 billion a year--but even the American Mining Congress, the trade and lobbying group, admits that most known metallic mineral reserves in the West are on U.S. property, which is vast. The U.S. government owns nearly half of California, for example.
An 8%-royalty plan died in Congress last year but is likely to be revived soon. Aghast, the industry says that exacting payment for the minerals will hurt the competitiveness of U.S. mining companies and that tampering with the law will let environmentalists change it somehow so they can tie the miners up in litigation.
No property owner in his right mind would buy that. Anyone who finds gold in my back yard is going to pay me for it, and California, among other states, agrees. You want to mine state property? You pay the state.
The miners are right about one thing: Like environmental regulations, government royalty or leasing requirements will raise the lowest level of ore the companies can profitably mine--at least until new technologies come along.
But these are unlikely, considering the sorry state of the industry’s knowledge infrastructure. California’s only full four-year mining program is at UC Berkeley, where undergraduate enrollment in the field is a dismal 14. Mike Hood, a Berkeley mining professor who looked into this, says enrollment at the six major Western mining colleges is down 80% since the 1970s.
Will the U.S. cavalry ride to the rescue? Hardly. Those pesky federal deficits are still with us; Bureau of Mines staffing is off 20% since 1980, and its research spending is way down.
But before you get mad at the miners--and we’re not talking about the odd grizzled prospector here, although they’re also to blame--remember that the industry isn’t unusually greedy in all this.
Subsidy-addicted farmers aren’t much different. Nor are holders of broadcasting licenses. Much of the middle class gets its goodies, too. Where is it written in stone that home mortgage interest must be tax deductible?
Hood says prior advances in technology helped mining bounce back from its 1980s depression. But he worries that “in the event of another downturn, there won’t be any R&D; to implement to save the industry again.”
Could there be a larger message in all this? Gee, let’s hope not.
