1. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Mining Law of 1872: How Does it Work and Where is it Headed? Frank Erisman March 14, 2013

2. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. U.S. Mining Law Example: Railroad land grants of every other square mile of Federal land and mineral rights created a “checker board” 20 miles or more on each side of railway

3. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. U.S. Mining Law Example: Southwestern Oregon – mixed government – private land and mineral rights, 20 miles on each side of the railway 20 mile line Railroad

4. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. U.S. Mining Law Example of modern mineral ownership pattern in Western U.S. (Sweetwater, Wyoming uranium exploration) State Private Federal Ten Miles

5. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. U.S. Mining Law U.S. Government Mineral Policy evolved over time from classification to disposal to retention: –1785-1849: Reservation/withdraw of mineral lands, some mineral leasing in Western territories –1849-1920: “Free mining” (California gold rush; Mining laws of 1866, 1870, 1872; no or limited mineral reservation in surface patents) –1920-present: Leading for some minerals, “free mining” for metals and other harder to find minerals; reservation of all minerals in surface patents

6. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. U.S. Mining Law The early miners in Nevada, California, and their other Western states acted under their own regulations – “mining districts” based on local customs, policed by the miners themselves (later became state laws) The 1849 gold rush in California was a large scale land occupation beyond the control of the Federal Government The miners were actually trespassers on public lands and as such, they mined without the sanction of federal law Miners WERE the community –See “Deadwood” on HBO

7. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. History of U.S. Mining Law The first federal law by which title could be acquired to any public minerals was the Act of July 26, 1866 With the 1849 gold rush as a backdrop, this 1866 Act established three important principles: –All public mineral lands should be open to exploration, unless specifically closed for another reason –The rights acquired under the local “mining district” system or rules (or state laws) should continue to be recognized, if consistent with federal mining law –Private ownership of federal mineral deposits could be obtained from the government under the law unilaterally, by actions taken by the miner (principle of self-initiation).

8. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. History of U.S. Mining Law The 1866 Mining Law was amended by the Act of May 10, 1872 Mining Law of 1872, as amended, still governs the exploration and mining of many minerals, including: –All metals and certain valuable non-metallic minerals (diamonds, uranium, specialty clays, and others)

9. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Features of Mining Law of 1872 Miner acquires possession/ownership of mineral rights in federal land by making a “discovery of a valuable mineral deposit” –A discovery is a property right, protected by law –Because it is based in part on economics, some “discoveries” can change over time (can be lost if mineral prices decrease) Mining claims and sites must be marked (“located”) on the ground Notice of mining claims and sites must be recorded on land records to give notice to the government and others

10. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Features of Mining Law of 1872 Must continue to develop the minerals on the land to retain possession (annual maintenance work or fees) “Patent” – full private (fee) ownership of surface and minerals could be obtained for some claims – not allowed since 1994 No royalty is currently paid to the government – taxes and economic development are public benefits

11. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Features of Mining Law of 1872 Claims must be located by U.S. citizens and U.S. corporations Lands must be “open to location: –Private lands, national parks, Indian reservations, wilderness areas, withdrawn federal lands or public lands with exisiting rights or claims are not open to claim staking Generally, first claim validly location prevails if claims overlap

12. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Features of Mining Law of 1872 Types of claims and sites: –Lode claim: Lode claims are the most common and were designed to be used to claim "upon views or lodes of quartz or other rock in place...” –Placer claim: "All forms of deposits, excepting veins or quartz, or rock in place" must be located as “placers” (e.g., panning for gold nuggets in a stream) –Millsites: Millsites may be located on non-mineral land for any purpose related to the mining and production of ore. Millsites cannot be mined, but may be used for milling and processing facilities.

13. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Features of U.S. Mining Law Must continue to develop the minerals on the land to retain possession (annual maintenance work or fees): Patent gives full title to minerals and surface, and the discovery and annual maintenance requirements no longer apply –Can do anything with a claim (e.g., build a casino) Since October 1, 1994, new patenting has been suspended by law

14. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Features of U.S. Mining Law Complex land ownership pattern –Example of historic “gold rush” mineral ownership pattern in Western U.S. (Gilpin County, Colorado)

15. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Amendments to U.S. Mining Law Critics say the law is 137 years old and unchanged, but that is not true Some of the amendments to the Mining Law: –Mineral Leasing Act of 1920 provides that oil, gas, coal, potassium, sodium, phosphate, oil shale, and certain other minerals can only be acquired by lease. A lease is discretionary with the government Eliminates the self-initiation aspect of the mining law Leaseable mineral deposits are generally large scale and their location is often generally known –Multiple Mineral Development Act of 1954 authorized the location of mining claims on lands which at the time of location are included in a permit or lease issued under the Mineral Leasing Law (uranium – oil and gas conflicts)

16. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Amendments to U.S. Mining Law Some of the amendments to the Mining Law: –Multiple Surface Use Act and Common Varieties Act of 1955 enacted to curtail non-mining use of the surface of mining claims. The owner of a mining claim subsequent to July 23, 1955, is entitled to the surface only as necessary for the mining operation and the claim is subject to surface-management activities of the federal government and the public until patent. “Common varieties” of stone were removed from the mining claim system and are now sold under contracts. –Federal Land Policy and Management Act (FLPMA) of 1976 grants the Secretary of the Interior/Bureau of Land Management broad authority to manage public lands including regulations concerning mineral location, exploration, and development activities, reclamation of mining and filing of mining claims in BLM records

17. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. Mine Production and Reclamation/Closure Building and operating the mine community impacts must be addressed (EIS, permitting, public comment, litigation) Planning for post-mining community? Not in the Mining Law of 1872 – except they hoped prospectors would settle down on those 20 acres, get married and raise a family

18. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Modern Mining Business The “project pipeline” of a major mining company

19. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. How Mining Works: Example Grass roots exploration and drilling to define mineral deposit –Multiple years of sampling and drilling –$5 million per year for drilling Calculate reserves and develop Plan of Operations –2 to 4 years –Up to $3 million per year Testimony of Phillips Baker, President, Hecla Mining (Senate Hearing on Mining Law Reform July 14, 2009) “The following are the steps and costs to find and develop a mine in the U.S.:

20. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. The Modern Mining Business A “pick and shovel” law…

21. www.schwabe.com Bend, OR | Portland, OR | Salem, OR | Seattle, WA | Vancouver, WA | Washington D.C. How Mining Works: Example Total time and Costs before any ore is mined –Time up to 15 years –Total costs in excess of $300 million including such –large capital investment items as: Ore processing mill $25-50 million Underground access shaft $250 million” Larger mines can cost 5-10X this much