Saturday, March 21, 2009

U.S. Mining Law:Obtaining Federal Land

                                     EXECUTIVE SUMMARY

The U.S. has two major approaches to obtain Federal land for dimension marble quarries: earning the land by improving it and then buying it cheap (exemplified by the Mining Law of 1872); leasing it while paying rent and royalties (exemplified by the Mineral Leasing Act of 1920), with both approaches having been modified repeatedly over time (exemplified by the Federal Land Policy Management Act of 1976).  The approaches commonly have built-in flexibility; for example, in their rent and royalty rates and amounts, negotiablity in these; and variation in duration of lease and acreage-size of lease.

The application of the resulting regulations and procedures for obtaining land and/or the minerals on it depends on the status and availability of the land.  This land-regulation-procedure mix works out into the five following systems to obtain land: The first such system involves locating an ordinary mining claim, in which the applicant goes to the Bureau of Land Management (BLM), which checks whether the land is available for location.  Then, if it is, the claim can be located on the ground with piles of rocks or stakes at the corners with notices attached; an application can be filed at the local BLM office and notice given to the county land recorder.  The land can now be explored for a valuable mineral, such as dimension marble.  A plan of operation is required for drilling, excavations, watercourse diversion, road construction, and similar surface disturbances.  The holder of the claim now must pay $125 assessment each year or get a waiver by performing the work (trenching, drilling).  After some years, the holder can patent the claim and get full title.

The second system involves locating a mining claim on special-status land (i.e., land being reviewed for wilderness designation).  Although it resembles the procedure for locating an ordinary mining claim, it requires a more detailed plan of operations which covers, for example, destruction of any tree 5 cm. or more in diameter, changing the width or gradient of any roads, or changing a water course.

The third system involves leasing known mineral land on a competitive basis.  The BLM begins the process by issuing a Notice of Realty Action on the desired land, and the applicants then apply for for a Land Use Authorization, detailing the applicants' performance capability, the impact on the environment, and their compliance with air and water quality standards.  When the Land Use Authorization is approved, the lease is put up for bid with royalty rate attached.  The highest (cash bonus) bidder wins, when the bidder's performance capability is demonstrated.

The fourth system involves leasing land where no minerals are known, on a noncompetitive basis.  This begins by obtaining a Prospecting Permit, which requires that there be no polluting or damaging the surface.  If a valuable mineral is found, a noncompetitive Preference Right Lease is issued to the holder of the Prospecting Permit.

The fifth system involves no land at all, but simply buying the dimension stone from the BLM, as if it were common clay, sand, or gravel.  Dimension stone has a borderline BLM classification and it is usually possible to buy something like flagstone (unsawn) or rubble (riprap), depending on local circumstances.

These systems to obtain Federal land and/or its mineral product are quite flexible in terms of royalty and land-parcel-size.  For example, the royalty rate for dimension stone within a state can be 8% or 10%, depending on factors such as distance from market.  The annual rent or royalty can be waived or reduced if the producer making payment has had a labor strike or would have to sell the product at a financial loss.  The fair value of the product the royalty is calculated on is based on a market survey, and the royalty rate is the product of negotiations with the leasee in the great majority of cases.  In terms of flexibility of land-parcel-size, if one maximally-sized claim is not enough, more claims can be located beside the first one.  Actual quarrying can continue outside a claim boundary, if it does no additional damage.  Although there is a maximum parcel size for land to be leased, a number of land parcels could be leased.