Hardrock Mining
BLM Needs to Better Manage Financial Assurances to Guarantee Coverage of Reclamation Costs Gao ID: GAO-05-377 June 20, 2005Since the General Mining Act of 1872, billions of dollars in hardrock minerals, such as gold, have been extracted from federal land now managed by the Department of the Interior's Bureau of Land Management (BLM). For years, some mining operators did not reclaim land, creating environmental, health, and safety risks. Beginning in 1981, federal regulations required all operators to reclaim BLM land disturbed by these operations. In 2001, federal regulations began requiring operators to provide financial assurances before they began exploration or mining operations. GAO was asked to determine the (1) types, amount, and coverage of financial assurances operators currently use; (2) extent to which financial assurance providers and others have paid to reclaim land not reclaimed by the operator since BLM began requiring financial assurances; and (3) reliability and sufficiency of BLM's automated information system (LR2000) for managing financial assurances for hardrock operations.
According to GAO's survey of BLM state offices, as of July 2004, hardrock operators were using 11 types of financial assurances, valued at about $837 million, to guarantee reclamation costs for existing hardrock operations on BLM land. Surety bonds, letters of credit, and corporate guarantees accounted for most of the assurances' value. However, these financial assurances may not fully cover all future reclamation costs for these existing hardrock operations if operators do not complete required reclamation. BLM reported that, as of July 2004, some existing hardrock operations do not have financial assurances and some have no or outdated reclamation plans and/or cost estimates, on which financial assurances should be based. BLM identified 48 hardrock operations on BLM land that had ceased and not been reclaimed by operators since it began requiring financial assurances. BLM reported that the most recent cost estimates for 43 of these operations totaled about $136 million, with no adjustment for inflation; it did not report reclamation cost estimates for the other 5 operations. However, as of July 2004, financial assurances had paid or guaranteed $69 million and federal agencies and others had provided $10.6 million to pay for reclamation, leaving $56.4 million in reclamation costs unfunded. Financial assurances were not adequate to pay all estimated costs for required reclamation for 25 of the 48 operations because (1) some operations did not have financial assurances, despite BLM efforts in some cases to make the operators provide them; (2) some operations' financial assurances were less than the most recent reclamation cost estimates; and (3) some financial assurance providers went bankrupt. Also, cost estimates may be understated for about half of the remaining 23 operations because the estimates may not have been updated to reflect inflation or other factors. BLM's LR2000 is not reliable and sufficient for managing financial assurances for hardrock operations because BLM staff do not always update information and LR2000 is not currently designed to track certain critical information. Specifically, staff have not entered information on each operation, and for those operations that are included, the information is not always current. Also, LR2000 does not track some critical information--operations' basic status, some types of allowable assurances, and state- and county-held financial assurances. Given these limitations, BLM's reliance on LR2000 to manage financial assurances is mixed: headquarters does not always rely on it and BLM state offices' reliance varies. To compensate for LR2000's limitations, some BLM offices use informal record-keeping systems to help manage hardrock operations and financial assurances. BLM has taken some steps and identified others to improve LR2000 for managing financial assurances for hardrock operations.
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Director: Team: Phone:GAO-05-377, Hardrock Mining: BLM Needs to Better Manage Financial Assurances to Guarantee Coverage of Reclamation Costs
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Report to the Ranking Minority Member, Committee on Homeland Security
and Governmental Affairs, U.S. Senate:
June 2005:
Hardrock Mining:
BLM Needs to Better Manage Financial Assurances to Guarantee Coverage
of Reclamation Costs:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-377]:
GAO Highlights:
Highlights of GAO-05-377, a report to the Ranking Minority Member,
Committee on Homeland Security and Governmental Affairs, U.S. Senate:
Why GAO Did This Study:
Since the General Mining Act of 1872, billions of dollars in hardrock
minerals, such as gold, have been extracted from federal land now
managed by the Department of the Interior‘s Bureau of Land Management
(BLM). For years, some mining operators did not reclaim land, creating
environmental, health, and safety risks. Beginning in 1981, federal
regulations required all operators to reclaim BLM land disturbed by
these operations. In 2001, federal regulations began requiring
operators to provide financial assurances before they began exploration
or mining operations. GAO was asked to determine the (1) types, amount,
and coverage of financial assurances operators currently use; (2)
extent to which financial assurance providers and others have paid to
reclaim land not reclaimed by the operator since BLM began requiring
financial assurances; and (3) reliability and sufficiency of BLM‘s
automated information system (LR2000) for managing financial assurances
for hardrock operations.
What GAO Found:
According to GAO‘s survey of BLM state offices, as of July 2004,
hardrock operators were using 11 types of financial assurances, valued
at about $837 million, to guarantee reclamation costs for existing
hardrock operations on BLM land. Surety bonds, letters of credit, and
corporate guarantees accounted for most of the assurances‘ value.
However, these financial assurances may not fully cover all future
reclamation costs for these existing hardrock operations if operators
do not complete required reclamation. BLM reported that, as of July
2004, some existing hardrock operations do not have financial
assurances and some have no or outdated reclamation plans and/or cost
estimates, on which financial assurances should be based.
BLM identified 48 hardrock operations on BLM land that had ceased and
not been reclaimed by operators since it began requiring financial
assurances. BLM reported that the most recent cost estimates for 43 of
these operations totaled about $136 million, with no adjustment for
inflation; it did not report reclamation cost estimates for the other 5
operations. However, as of July 2004, financial assurances had paid or
guaranteed $69 million and federal agencies and others had provided
$10.6 million to pay for reclamation, leaving $56.4 million in
reclamation costs unfunded. Financial assurances were not adequate to
pay all estimated costs for required reclamation for 25 of the 48
operations because (1) some operations did not have financial
assurances, despite BLM efforts in some cases to make the operators
provide them; (2) some operations‘ financial assurances were less than
the most recent reclamation cost estimates; and (3) some financial
assurance providers went bankrupt. Also, cost estimates may be
understated for about half of the remaining 23 operations because the
estimates may not have been updated to reflect inflation or other
factors.
BLM‘s LR2000 is not reliable and sufficient for managing financial
assurances for hardrock operations because BLM staff do not always
update information and LR2000 is not currently designed to track
certain critical information. Specifically, staff have not entered
information on each operation, and for those operations that are
included, the information is not always current. Also, LR2000 does not
track some critical information”operations‘ basic status, some types of
allowable assurances, and state-and county-held financial assurances.
Given these limitations, BLM‘s reliance on LR2000 to manage financial
assurances is mixed: headquarters does not always rely on it and BLM
state offices‘ reliance varies. To compensate for LR2000‘s limitations,
some BLM offices use informal record-keeping systems to help manage
hardrock operations and financial assurances. BLM has taken some steps
and identified others to improve LR2000 for managing financial
assurances for hardrock operations.
What GAO Recommends:
GAO recommends that BLM strengthen its management of financial
assurances by requiring its state office directors to develop an action
plan for ensuring operators have adequate financial assurances and
improving the reliability and sufficiency of LR2000. Interior did not
concur with the recommendations; GAO believes they are needed to ensure
adequate financial assurances.
www.gao.gov/cgi-bin/getrpt?GAO-05-377.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robin M. Nazzaro at (202)
512-3841 or nazzaror@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
BLM Identified 11 Types of Financial Assurances Valued at Approximately
$837 Million, but These Financial Assurances May Not Fully Cover
Reclamation Costs:
Financial Assurances Were Not Always Adequate to Pay All Estimated
Costs for Required Reclamation for Hardrock Operations That Had Ceased
and Not Been Reclaimed by Operators:
BLM's LR2000 Is Not Reliable and Sufficient for Managing Financial
Assurances for Hardrock Operations:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Number of Notice-and Plan-Level Hardrock Operations and
Value of Associated Financial Assurances:
Appendix III: Detailed Information on 48 Hardrock Operations That Had
Ceased and Not Been Reclaimed by Operators:
Appendix IV: Comments from the Department of the Interior:
GAO Comments:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Description of Types of Hardrock Operations under 1981 and
2001 BLM Regulations:
Table 2: Type and Amount of Financial Assurances for 12 States with
Existing Hardrock Operations, as of July 2004:
Table 3: Number of Notice-and Plan-Level Hardrock Operations and the
Percentage of These Operations BLM Reported Had No Financial
Assurances, by State, as of July 2004:
Table 4: Reported Percentage of Notice-and Plan-Level Hardrock
Operations without Reclamation Plans and Cost Estimates, by State, as
of July 2004:
Table 5: Number and Selected Characteristics of 48 Hardrock Operations
Reported by BLM as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, by State, as of July 2004:
Table 6: Cost Estimates for Required Reclamation of 43 Hardrock
Operations with Cost Estimates Reported by BLM as Ceased and Not
Reclaimed by Operators Since BLM Began Requiring Financial Assurances,
by State, as of July 2004:
Table 7: Type and Value of Financial Assurances Used by Operators to
Guarantee Reclamation Costs for 38 Operations with Financial Assurances
that BLM Identified as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, as of July 2004:
Table 8: Reasons Financial Assurances Were Not Adequate to Pay
Estimated Costs for Required Reclamation for 25 Hardrock Operations
Identified by BLM as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, as of July 2004:
Table 9: Comparison of Most Recent Cost Estimate as of July 2004 with
the Value of Financial Assurances for 13 Hardrock Operations with Cost
Estimates That Exceeded Financial Assurances:
Table 10: Value of Cost Estimate Prepared before Hardrock Operations
Ceased and the Number of Months Elapsed between Estimate Date and July
2004 for 12 Hardrock Operations Where Financial Assurances Were Equal
to or Greater than Cost Estimate:
Table 11: Reclamation Status and BLM Views on the Likelihood of
Completing Reclamation of 43 Hardrock Operations for Which Required
Reclamation Had Not Been Completed by Operators, as of July 2004:
Table 12: States' Views on Reliability and Adequacy of LR2000 to Manage
Financial Assurances:
Table 13: Number of Notice-and Plan-Level Hardrock Operations and
Associated Financial Assurances, by State, as of July 2004:
Table 14: Basic Characteristics of 48 Hardrock Operations That Had
Ceased and Not Been Reclaimed by Operators:
Table 15: Key Dates for 48 Hardrock Operations That Had Ceased and Not
Been Reclaimed by Operators:
Table 16: BLM Steps to Compel Operators to Reclaim BLM Land Disturbed
by 48 Hardrock Operations That Had Ceased and Not Been Reclaimed by
Operators and the Reasons Operators Did Not Reclaim the Land:
Table 17: Estimated Reclamation Costs for 48 Hardrock Operations That
Had Ceased and Not Been Reclaimed by Operators:
Table 18: Types and Amount of Financial Assurances and the Amount of
Financial Assurances Relinquished and Spent on Reclamation of 48
Hardrock Operations That Had Ceased and Not Been Reclaimed by
Operators:
Table 19: Sources of Other Funds and the Status of Reclamation of 48
Hardrock Operations That Had Ceased and Not Been Reclaimed by
Operators:
Figures:
Figure 1: BLM-Managed Land:
Figure 2: Overview of a Hardrock Operation Using a Heap-Leaching
Process:
Figure 3: The Boundaries of the 12 BLM State Offices:
Figure 4: Types of Financial Assurances Used, Value, and Percentage of
Total Value:
Figure 5: Sources and Amount of Funds Provided or Guaranteed to Pay
Estimated $136 Million in Costs for Required Reclamation for Operations
that BLM Identified as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, as of July 2004:
Figure 6: Sources of $10.6 Million Provided by Others to Pay the Cost
of Required Reclamation for 11 Operations Identified by BLM as Ceased
and Not Reclaimed by Operators, as of July 2004:
Figure 7: Zortman and Landusky Mining Operations at or Near Buildout in
1993 and Status of Reclamation in 2004:
Abbreviations:
ALIS: Alaska Land Information System:
BLM: Bureau of Land Management:
CERCLA: Comprehensive Environmental Restoration, Compensation, and
Liability Act of 1980:
LR2000: Legacy Rehost 2000:
RAMS: Restoration of Abandoned Mine Sites:
Letter June 20, 2005:
The Honorable Joseph I. Lieberman:
Ranking Minority Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
Dear Senator Lieberman:
The General Mining Act of 1872 encouraged development of the West by
allowing individuals[Footnote 1] to stake claims and obtain exclusive
rights to gold, silver, copper, and other valuable hardrock mineral
deposits on land belonging to the United States. Since then, thousands
of operators[Footnote 2] have extracted billions of dollars worth of
hardrock minerals from land now managed by the Department of the
Interior's Bureau of Land Management (BLM)--the agency that manages the
largest amount of federal land.[Footnote 3] However, some operators did
not reclaim BLM land disturbed by hardrock operations related to
exploration, mining, and mineral processing when their operations
ceased. These operators left BLM with many thousands of acres of
disturbed land, some of which posed environmental and health and safety
risks.
The Federal Land Policy and Management Act of 1976 states that the
Secretary of the Interior shall take any action required to prevent the
"unnecessary or undue degradation" of public land and its resources.
BLM has developed and revised regulations and issued policy under this
provision. Specifically, BLM issued regulations, effective in 1981,
that require all operators to reclaim BLM land disturbed by their
hardrock operations. For plan-level operations--those disturbing over 5
acres of land or those in certain designated areas, such as the
national wild and scenic rivers system--operators were to have a BLM-
approved plan that documented all the anticipated hardrock activities
and all required reclamation. For notice-level operations--those
causing a surface disturbance of 5 acres or less--operators were to
submit notices that informed BLM of the operators' intentions, but
these notices did not require BLM's approval. Plans have to be approved
and notices received by BLM before the operators begin exploration or
mining operations. Also, to guarantee that reclamation costs are paid,
these regulations stated that BLM could require plan-level operators to
provide bonds or other financial assurances in an amount specified by
BLM, taking into consideration the estimated cost of reasonable
stabilization and reclamation of the disturbed land.[Footnote 4]BLM
also could require notice-level operators with a history of
noncompliance with federal regulations to submit a plan of operation
and thus notice-level operators could be required to provide financial
assurances. Through a formal agreement, BLM can designate a state
agency as responsible for managing some or all hardrock requirements,
including financial assurances.[Footnote 5] Operators have used a
variety of types of financial assurances, ranging from funded
assurances, such as cash and negotiable U.S. securities, to corporate
guarantees, which are promises to complete reclamation that are backed
only by the financial strength of the operator. Despite having the
regulatory authority to do so, BLM rarely required operators to provide
financial assurances throughout the 1980s.[Footnote 6]
In August 1990, BLM issued a policy instructing BLM officials to
require operators to provide financial assurances for all plan-level
operations and for notice-level operations if the operators had a
record of noncompliance with federal regulations.[Footnote 7] BLM
generally limited financial assurances to $1,000 per acre for
exploration and $2,000 per acre for mining operations. However, BLM
required operators using leaching chemicals, such as cyanide and
sulfuric acid, to extract minerals from ore and required operators with
a record of noncompliance to provide financial assurances to cover all
estimated reclamation costs for hardrock operations. For these
operations, BLM was to estimate the cost of reclamation and add to it
the reasonable administrative costs that would be incurred if
reclamation were done under contract. However, BLM did not further
specify the types of financial assurances that could or could not be
used.
Concerns about the types of financial assurance and the lack of
financial assurances requirements for all notice-level operations,
among other things, prompted BLM to establish new regulations in 2001.
The new regulations require operators to include reclamation plans and
cost estimates in the notices and plans of operation that they submit
to BLM for acceptance or approval. The new regulations require that
before exploration or mining operations begin, operators must provide
financial assurances to cover all estimated reclamation costs for both
notice-and plan-level hardrock operations. In addition, BLM must
periodically review the estimated cost of reclamation to determine if
the cost estimates should be updated. The regulations also specify the
types of acceptable financial assurances and prohibit new corporate
guarantees and increases or transfers in the corporate guarantees used
under BLM's previous policy. The financial assurance provisions of the
new regulations applied immediately--on January 20, 2001, for new
notice-and plan-level operations and on January 20, 2003, for extended
notice-level operations, unless the notice was modified.[Footnote 8]
Plans of operations that were approved before January 20, 2001, were
required to have financial assurances in place no later than November
20, 2001.
Under federal regulations, if an operator fails to complete required
reclamation, BLM or the designated state agency may take steps to
obtain funds from the financial assurance providers. Providers then
have the option of (1) relinquishing the amount guaranteed by the
financial assurance to BLM or the designated state agency, which would
then use the funds for reclamation, or (2) completing the reclamation
themselves. The regulations also give BLM the authority to take steps,
such as issuing noncompliance and suspension orders, and revoking plans
of operation, if operators do not comply with the financial assurance
or other regulatory requirements.
BLM established an automated information system--the Legacy Rehost 2000
(LR2000)--in 1999 that combined into one system several existing
systems that collect and store information on the programs and land BLM
manages. LR2000 is composed of a number of subsystems, some of which
contain information on hardrock operations and financial assurances.
You asked us to determine the (1) types, amount, and coverage of
financial assurances operators currently use to guarantee reclamation
costs, (2) amount that financial assurance providers and others have
paid to reclaim operations that had ceased and not been reclaimed since
BLM began requiring financial assurances and the estimated costs of
completing reclamation for such operations, and (3) reliability and
sufficiency of BLM's LR2000 for managing financial assurances for
hardrock operations.
We did not rely on LR2000 information to address these objectives, but
instead designed two surveys to obtain information from BLM's state and
field offices because they maintain the case files and other specific
information on hardrock operations. We asked the 12 BLM state offices
that manage BLM programs across the United States to complete surveys
for each state in their jurisdiction with hardrock operations.[Footnote
9] We verified the information in the surveys through discussions with
BLM officials in two state and four field offices and by reviewing case
files and other documents. In the first survey, which focused on
states' experiences with hardrock operations, we asked these 12 offices
to provide information on (1) the number of existing hardrock
operations for each state within their jurisdiction,[Footnote 10] (2)
the types and the amounts of financial assurances provided for existing
hardrock operations in each state, (3) their views on the effectiveness
of the various types of financial assurances, (4) their views on the
reliability and sufficiency of hardrock operation data contained in
LR2000, and (5) their use of LR2000 for managing hardrock operations
and financial assurances in their states. In the second survey, which
focused on selected hardrock operations, we asked these 12 offices to
provide detailed information on hardrock operations within their
jurisdiction that met both of the following criteria: the operator (1)
ceased operations after the requirement for financial assurances went
into effect--August 1990 for plan-level operations, January 2001 for
new notice-level operations, and January 2003 for existing notice-level
operations and (2) failed to complete the required reclamation. We used
information in this survey to determine the estimated reclamation costs
and the adequacy of financial assurances for reclaiming each hardrock
operation that BLM identified as meeting these criteria. We took steps
to determine whether BLM officials identified all hardrock operations
that met these criteria, such as comparing BLM's list of operations
with operations identified by others. To the extent that BLM did not
identify all hardrock operations that had ceased and not been reclaimed
by the operator, the information it reported to us would be
understated. In addition, we did not collect information on the
thousands of ceased hardrock operations since 1872 that did not require
financial assurances and therefore fell outside the scope of this
review.
We also took steps to understand BLM's management and oversight of
hardrock operations and the use of financial assurances to ensure
reclamation. We reviewed BLM regulations, documents, and independent
studies relevant to hardrock operations and financial assurances. We
also discussed these issues with BLM officials at headquarters and in
selected state and field offices. To understand the relationship
between BLM and state agencies responsible for overseeing hardrock
operations, we met with BLM state office and state agency officials in
several states, and reviewed relevant memorandums of understanding and
other agreements. To understand the reliability and sufficiency of
LR2000, we spoke with BLM officials responsible for administering the
system and staff in selected BLM state and field offices who enter
information into the system and who use the system to manage hardrock
operations and financial assurances. We also discussed relevant
hardrock operation and financial assurance issues with experts and
representatives from the mining industry, academia, and environmental
groups. Finally, to better understand hardrock operations and
reclamation requirements, we visited five mining operations in Nevada
and Montana. Appendix I provides detailed information on our scope and
methodology.
We conducted our review from October 2003 through May 2005 in
accordance with generally accepted government auditing standards, which
included an assessment of data reliability.
Results in Brief:
As of July 2004, hardrock operators were using 11 different types of
financial assurances, valued at approximately $837 million, to
guarantee reclamation costs associated with approximately 2,500
existing hardrock operations on BLM land in 12 western states,
according to our analysis of survey results. Surety bonds ($384
million), letters of credit ($238 million), and corporate guarantees
($204 million) accounted for almost all of the $837 million in
financial assurances. However, these financial assurances may not fully
cover all future reclamation costs for these existing hardrock
operations if operators do not complete required reclamation. BLM
reported that, as of July 2004, some existing hardrock operations do
not have financial assurances, and some have no or outdated reclamation
plans and/or cost estimates on which financial assurances should be
based.
BLM identified 48 hardrock operations on its land that had ceased and
not been reclaimed by operators since it began requiring financial
assurances. BLM reported that the most recent cost estimates for
reclamation required by applicable reclamation plans and federal
regulations for 43 of the 48 operations totaled about $136 million,
with no adjustment for inflation; it did not report reclamation cost
estimates for the other 5 operations. However, as of July 2004, the BLM-
required financial assurances had provided or were guaranteeing $69
million, and federal agencies and others had provided $10.6 million to
pay the estimated costs for required reclamation for the 48 operations,
leaving $56.4 million in unfunded reclamation costs. Financial
assurances were not adequate to pay all estimated costs for required
reclamation for 25 of the 48 ceased operations for several reasons.
First, operators did not provide required financial assurances for 10
operations, despite BLM's efforts in some cases to make the operators
provide them. Second, financial assurances that were provided were less
than the most recent reclamation cost estimates for 13 operations.
Third, financial assurance providers went bankrupt and did not have the
funds to pay all reclamation costs for two other operations. In
addition, cost estimates may be understated for about half of the
remaining 23 operations because the cost estimates may not have been
updated to reflect inflation or other factors that could increase
reclamation costs. Furthermore, the $136 million cost estimate is
understated to the extent that BLM did not identify or report
information in response to our survey on all hardrock operations that
had ceased and not been reclaimed by operators, as required. For
example, Oregon's BLM state office estimated that 20 notice-level
operations in Washington state had ceased and not been reclaimed, but
neither the Oregon BLM state office nor its field offices completed our
surveys for these operations. Clearly, the $136 million estimate would
be higher if BLM's state or field offices had reported this
information. Finally, according to BLM officials, required reclamation
had been completed for only 5 of the 48 operations as of July 2004, but
they believe it is likely that required reclamation will be completed
on an additional 28 operations sometime in the future.
BLM's LR2000 is not reliable and sufficient for managing financial
assurances that guarantee coverage of reclamation costs for BLM land
disturbed by hardrock operations because staff do not always update
information, and LR2000 is not currently designed to track certain
critical information. Specifically, staff have not entered information
on each hardrock operation and, for those hardrock operations included
in LR2000, the information is not always current. Moreover, LR2000 does
not track some information on hardrock operations and their associated
financial assurances that we believe is critical for effectively
managing financial assurances. This information includes the basic
status of operations, such as whether they are ongoing or have ceased
and should be reclaimed; some types of allowable financial assurances;
and state-and county-held financial assurances. Given these
limitations, it is not surprising that BLM's reliance on LR2000 to
manage financial assurances is mixed. Specifically, BLM headquarters
does not always rely on the system, and BLM state offices' reliance
varies--in four states with hardrock operations, the state and field
offices relied on the system to little or no extent; in eight states,
to a moderate or some extent; and in one state, to a very great extent.
In part to compensate for LR2000's limitations, some BLM state and
field offices use informal record-keeping systems to help manage
hardrock operations and financial assurances. BLM has taken some steps
and identified others to improve LR2000 for managing financial
assurances for hardrock operations.
To ensure that hardrock operators on BLM land have adequate financial
assurances, we are making recommendations to the Secretary of the
Interior to strengthen BLM's management of financial assurances for
hardrock operations on its land by directing the Director of BLM to (1)
require state office directors to develop an action plan for ensuring
that operators have adequate financial assurances and (2) improve the
reliability and sufficiency of BLM's automated information system.
In responding to a draft of this report, Interior stated that it
appreciated the advice and critical assessment we provided on BLM's
management of financial assurances required for hardrock operations.
However, without acknowledging or addressing specific deficiencies
identified in our report, Interior disagreed with our recommendations,
stating that guidance already issued ensured that proper management
attention was being provided. In the face of considerable evidence in
this report to the contrary, Interior's assertions that all is well and
that recently issued policy and guidance ensure that adequate financial
assurances are in place seems hard to comprehend. Accordingly, we
continue to believe that our recommendations are warranted to ensure
that adequate financial assurances are in place. Interior's letter and
our comments are included in appendix IV.
Background:
BLM is responsible for managing approximately 261 million acres of
public land, over 99 percent of which is located in 12 western states,
including Alaska. Approximately 90 percent of this land is open to the
public for hardrock mineral exploration and mining. Less than one-tenth
of 1 percent of BLM land is affected by existing hardrock operations.
Figure 1 shows the BLM land available for hardrock operations.
Figure 1: BLM-Managed Land:
[See PDF for image]
[End of figure]
How Hardrock Operations Work and the Importance of Reclamation:
Hardrock operations consist of three primary stages--exploration,
mining, and mineral processing. Operators are responsible for
reclaiming the land disturbed by such operations at the earliest
economically and technically feasible time, if this land will not be
further disturbed. Exploration involves prospecting and other steps to
locate mineral deposits. Drilling is the most common exploration tool
for identifying the extent, quantity, and quality of minerals within an
area. The mining phase includes developing the mining infrastructure
(water, power, buildings, and roads) and extracting the minerals.
Mineral extraction generally entails drilling, blasting, and hauling
ore from pit areas to processing areas. To process minerals, operators
prepare the ore by crushing or grinding it to extract minerals. The
material left after the minerals are extracted--tailings (a combination
of fluid and rock particles)--is then disposed of, often in a nearby
pile. In addition, some operators use a leaching process to recover
microscopic hardrock minerals from heaps of crushed ore by percolating
solvent (such as cyanide for gold and sulfuric acid for copper) through
the heap of ore. Through this heap-leaching process, the minerals
adhere to the solvent as it runs through the leach heap and into a
collection pond. The mineral-laced solution is then taken from the
collection pond to the processing facility, where the valuable minerals
are separated from the solution for further refinement. Figure 2
provides an overview of the three stages of a hardrock operation using
a heap-leaching process.
Figure 2: Overview of a Hardrock Operation Using a Heap-Leaching
Process:
[See PDF for image]
[End of figure]
At the earliest feasible time, operators are required to reclaim BLM
land that will not be further disturbed to prevent or control on-site
or off-site damage. Reclamation practices vary by type of operation and
by applicable federal, state, and local requirements. However,
reclamation generally involves resloping pit walls to minimize erosion,
removing or stabilizing buildings and other structures to reduce safety
risks, removing mining roads to prevent damage from future traffic, and
capping and revegetating leach heaps, tailings, and waste rock piles to
control erosion and minimize the potential for contamination of
groundwater from acid rock drainage and other potential water pollution
problems.[Footnote 11] Addressing potential water pollution problems
may involve long-term monitoring and treatment. Reclamation costs for
hardrock mining operations vary by type and size of operation. For
example, the costs of plugging holes at an exploration site are usually
minimal. Conversely, reclamation costs for large mining operations
using leaching practices can be in the tens of millions of dollars.
Laws and Regulations for Hardrock Operations:
Hardrock operations on BLM land are regulated by federal and state
laws. Under the General Mining Act of 1872 (Mining Act),[Footnote 12]
an individual or corporation can establish a claim to any hardrock
mineral on public land.[Footnote 13] Upon recording a mining claim with
BLM, the claimant must pay an initial $25 location fee and a $100
maintenance fee annually per claim;[Footnote 14] the claimant is not
required to pay royalties on any hardrock minerals extracted. The
Mining Act was designed to encourage the settlement and development of
the West; it was not designed to regulate the associated environmental
effects of mining. The number of hardrock operations left abandoned
throughout the West after operations ceased is not known but is
estimated to be in the hundreds of thousands, many of which pose
environmental, health, and safety risks. Until Congress passed the
Federal Land Policy and Management Act of 1976 (FLPMA),[Footnote 15]
development of hardrock minerals on public land remained largely
unregulated. FLPMA states that the Secretary of the Interior shall take
any action necessary to prevent "unnecessary or undue degradation" of
public land.[Footnote 16]
Under FLPMA, BLM has developed and revised regulations and issued
policies to prevent unnecessary or undue degradation of BLM land from
hardrock operations. BLM issued regulations that took effect in 1981 on
how these operations were to be conducted.[Footnote 17] Named for their
location in the Code of Federal Regulations, the "3809" regulations
classify surface disturbance generated by hardrock operations into
three categories: casual use, notice-level operations, and plan-level
operations. For all three operation levels, the operator must prevent
unnecessary and undue degradation and complete reclamation at the
earliest feasible time. BLM issued the revised 3809 regulations,
effective in part in January 2001 that, among other things, changed the
definition of the types of operations, modified the reclamation
requirements, and strengthened the financial assurance requirements.
Table 1 describes each type of operation under both the old and new
regulations.
Table 1: Description of Types of Hardrock Operations under 1981 and
2001 BLM Regulations:
Type of operation: Casual use;
Description under 1981 regulations:
* Activities ordinarily resulting in only negligible disturbance of
public land and resources;
* Does not require the operator to notify BLM;
Description under 2001 regulations:
* Activities ordinarily resulting in no or negligible disturbance of
public land or resources;
* Does not require the operator to notify BLM.
Type of operation: Notice-level operation;
Description under 1981 regulations:
* Any operation that causes a surface disturbance of 5 acres or less;
* Operator must notify BLM 15 calendar days before commencing
operations, but BLM does not approve the notice;
Description under 2001 regulations:
* Exploration operations that disturb 5 acres or less of public land;
* Operator must notify BLM 15 calendar days in advance of causing
surface disturbance, but BLM does not approve the notice.
Type of operation: Plan-level operation;
Description under 1981 regulations:
* Any operation that disturbs more than 5 acres or any operation, other
than casual use, in BLM special status areas, such as the national wild
and scenic river system;
* Plans of operations must be approved by BLM;
Description under 2001 regulations:
* Any operation greater than casual use, except for notice-level
operations, and operations causing surface disturbance greater than
casual use in special status areas, such as designated wilderness areas
and national monuments;
* Plans of operations must be approved by BLM[A].
Source: 1981 and 2001 federal regulations.
[A] Other plan-level operations include bulk sampling operations, in
which 1,000 tons or more of presumed ore for testing will be removed.
[End of table]
While the performance standards for reclamation under the 1981 and 2001
regulations remain the same, the 2001 regulations specifically
identified the components involved in reclamation. For standards under
both regulations, the operator of a notice-or plan-level operation must
reclaim the disturbed land at the earliest time that is economically
and technically feasible, except to the extent necessary to preserve
evidence of the presence of minerals, by taking reasonable measures to
prevent or control on-site and off-site damage to federal land.
Reclamation must include the following actions:
* saving topsoil to be applied after reshaping disturbed areas;
* taking measures to control erosion, landslides, and water runoff;
* taking measures to isolate, remove, or control toxic materials;
* reshaping the area disturbed, applying the topsoil, and revegetating
disturbed areas, where reasonably practicable; and:
* rehabilitating fisheries and wildlife habitat.
The 2001 regulations specified that, as applicable, reclamation
components include:
* isolating, controlling, or removing acid-forming and deleterious
substances;
* regrading and reshaping the disturbed land to conform with adjacent
landforms, facilitating revegetation, controlling drainage, and
minimizing erosion;
* placing growth medium and establishing self-sustaining vegetation;
* removing or stabilizing buildings, structures, or other support
facilities;
* plugging drill holes and closing underground workings; and:
* providing for post-mining monitoring, maintenance, or treatment.
The 2001 regulations also significantly strengthened the financial
assurance requirements for hardrock mining operations. Under the 1981
regulations, BLM had the option of requiring an operator to obtain a
bond or other financial assurances for plan-level hardrock operations
and for notice-level operations where the operator had a record of
noncompliance.[Footnote 18] However, BLM rarely exercised this
option.[Footnote 19] In 1990, BLM instructed its officials to require
operators of plan-level operations to provide (1) financial assurances
of $1,000 per acre for exploration and $2,000 per acre for mining and
(2) financial assurances for all estimated reclamation costs for
operations that used leaching chemicals and for operators with a record
of noncompliance. Under the 2001 regulations, BLM requires all notice-
and plan-level hardrock operators to provide financial assurances that
cover all estimated reclamation costs for all plan-and notice-level
operations before exploration or mining operations begin. Casual-use
operations do not have to provide financial assurances.
The 2001 regulations amended the types of financial assurances that can
be used. The 1981 regulations identified three types of acceptable
financial assurances--bonds, cash, and negotiable U.S. securities. BLM
could also accept evidence of an existing bond pursuant to state law or
regulations if BLM determined that the coverage would be equivalent to
the amount that would be required by BLM. Some operations used
corporate guarantees, which were allowable under state laws and
regulations. In contrast, the 2001 regulations prohibit the use of
corporate guarantees for new operations and state that corporate
guarantees currently in use under an approved BLM and state agreement
cannot be increased or transferred. The 2001 regulations specify the
following types of financial assurances as acceptable:
* surety bonds that meet the requirements of U.S. Treasury Circular
570;[Footnote 20]
* cash in an amount equal to the required dollar amount of the
financial assurance and maintained in a federal depository account of
the U.S. Treasury by BLM;
* irrevocable letters of credit from a bank or other financial
institution organized or authorized to transact business in the United
States;
* certificates of deposit or savings accounts not in excess of the
Federal Deposit Insurance Corporation's maximum insurable amount;
* negotiable U.S., state, and municipal securities or bonds with a
market value of at least the required dollar amount of the financial
assurance maintained in a Securities Investors Protection Corporation
insured trust account by a licensed securities brokerage firm for the
benefit of the Secretary of the Interior;[Footnote 21]
* investment-grade securities that (1) have a Standard and Poor's
rating of AAA or AA, or an equivalent rating from another nationally
recognized securities rating service, (2) have a market value of at
least the required dollar amount of the financial assurance, and (3)
are maintained in a Securities Investors Protection Corporation insured
trust account by a licensed securities brokerage firm for the benefit
of the Secretary of the Interior;
* certain types of insurance underwritten by a company having an A.M.
Best rating of "superior" or an equivalent rating from another
nationally recognized insurance rating service;
* evidence of an existing financial assurance under state law or
regulations, as long as the financial assurance is held or approved by
the state agency for the same operations covered by the notice or plan
of operation, has a value equal to the required amount, and is
redeemable by BLM. These financial assurances can include any of the
above instruments. In addition, they can include state bond
pools,[Footnote 22] as well as corporate guarantees that existed on
January 20, 2001, under an approved BLM and state agreement; or:
* trust funds or other funding mechanisms available to BLM. The 2001
regulations require operators, when BLM identifies a need for it, to
establish a trust fund or other funding mechanism to ensure
continuation of long-term treatment to achieve water quality standards
and for other long-term, post-mining maintenance requirements.
Finally, under the 2001 regulations, all notice-and plan-level
operators must submit a reclamation plan and an associated cost
estimate with its notice or plan of operation and any modifications or
renewals. The financial assurance amount is based on the cost estimate.
Furthermore, the associated cost estimate must reflect the cost to BLM
as if the agency had to contract with a third party to complete
reclamation. In addition, BLM issued guidance in February 2003, which
was revised in March 2004, setting forth factors that should be
considered in developing cost estimates. For example, estimates should
include administrative and other indirect costs. The regulations
require BLM to periodically review the estimates to determine if the
estimate should be updated to reflect any necessary changes in the cost
of reclaiming the operation.
BLM's Management and Oversight of Financial Assurances:
BLM headquarters manages and oversees hardrock operations as well as
its other programs, primarily through its headquarters, 12 state
offices, and 157 field offices. Within headquarters, the Minerals,
Realty, and Resource Protection group is responsible for administering
the mining laws and establishing hardrock operations policies. This
office is also responsible for evaluating the effectiveness of policy
implementation at the state-and field-office levels. For example, in
2004, BLM conducted a survey of 18 of its 157 field offices to
determine, among other things, whether operators had obtained financial
assurances as required.
Each state office is headed by a state director who reports to the
Director of BLM in headquarters. BLM state office delegations of
responsibilities for financial assurances vary from state to state. For
example, some state offices verify the authenticity of the financial
assurance and confirm that financial assurances are payable to BLM. The
state offices manage BLM programs and land in the geographic areas that
generally conform to the boundary of one or more states. The state
offices are Alaska, Arizona, California, Colorado, Idaho, Montana,
Nevada, New Mexico, Oregon, Utah, Wyoming, and Eastern States. BLM has
little land in the east and the Eastern state office is responsible for
all of the states in the east. Figure 3 shows the boundaries of the 12
BLM state offices.
Figure 3: The Boundaries of the 12 BLM State Offices:
[See PDF for image]
[End of figure]
The 157 BLM field offices, which are headed by field managers who
report to the state directors, are responsible for implementing several
BLM programs and policies, including many aspects of the hardrock
mining program. The field offices maintain case files on each hardrock
operation in their jurisdiction. Field office staffs are generally
responsible for, among other things, (1) reviewing notices and plans of
operations, along with associated reclamation plans and cost estimates;
(2) determining the amount of financial assurances needed to pay
reclamation costs; and (3) inspecting hardrock operations for
compliance with regulations.
In addition, BLM has specialized centers, which are organizationally
affiliated with headquarters, to carry out a variety of activities. One
of these centers, near Denver, Colorado, administers BLM's LR2000,
which is an automated information system used to collect and store
information on BLM land and programs, including hardrock operations.
LR2000 includes several subsystems that contain information on hardrock
operations and the financial assurances provided by operators.
Specifically, the Case Recordation System contains information on
hardrock operations, such as the name and address of the operator; the
location, type, and size of the operation; and inspection information.
The other subsystem--the Bonding and Surety System--contains
information on financial assurances, such as the types and amounts of
financial assurances and the names of the providers. BLM state and
field offices both enter data into LR2000 and thus are primarily
responsible for the data's accuracy and completeness. In most
instances, field offices are responsible for entering data about
hardrock operations into the Case Recordation System, while BLM state
offices are more often responsible for entering data about financial
assurances into the Bonding and Surety System.
BLM Identified 11 Types of Financial Assurances Valued at Approximately
$837 Million, but These Financial Assurances May Not Fully Cover
Reclamation Costs:
BLM reported that, as of July 2004, hardrock operators were using 11
types of financial assurances, valued at approximately $837 million, to
cover reclamation costs on BLM land in 12 western states. Surety bonds,
letters of credit, and corporate guarantees accounted for almost 99
percent of this $837 million. However, these financial assurances may
not fully cover all future reclamation costs if operators fail to
complete required reclamation. BLM reported that it had approximately
2,500 existing notice-and plan-level hardrock operations as of July
2004 and that some of these operations do not have financial
assurances, and some have no or outdated reclamation plans and/or cost
estimates on which financial assurances should be based. While BLM
state office explanations indicated that financial assurances are not
yet required for some operations, other explanations indicated that
some operations may not be complying with BLM's requirements.
Surety Bonds, Letters of Credit, and Corporate Guarantees Are the
Financial Assurances Currently Used to Cover Most of the Estimated
Reclamation Costs:
As of July 2004, operators were using 11 different types of financial
assurances valued at approximately $837 million to guarantee
reclamation costs for BLM land disturbed by hardrock operations,
according to our analysis of survey results. Almost 99 percent of the
$837 million in financial assurances is in the form of surety bonds,
letters of credit, and corporate guarantees. Figure 4 shows the types
of financial assurances used, their value, and the percentage of the
total value accounted for by each type.
Figure 4: Types of Financial Assurances Used, Value, and Percentage of
Total Value:
[See PDF for image]
[End of figure]
BLM reported that all of the current notice-and plan-level hardrock
operations on BLM land--2,490 operations--are located in 12 western
states.[Footnote 23] Table 2 shows the states with existing hardrock
operations and the types and amounts of financial assurances operators
are currently using in each state.
Table 2: Type and Amount of Financial Assurances for 12 States with
Existing Hardrock Operations, as of July 2004:
State: Alaska;
Number of operations: 240;
Surety bonds: $0;
Letters of credit: $0;
Corporate guarantees: $0;
Certificates of deposit: $0;
Cash accounts: $0;
State bond pools: $1,000,000;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $1,000,000.
State: Arizona;
Number of operations: 185;
Surety bonds: $3,802,763;
Letters of credit: $571,907;
Corporate guarantees: $0;
Certificates of deposit: $113,085;
Cash accounts: $239,343;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $45,900;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $4,772,998.
State: California;
Number of operations: 303;
Surety bonds: $3,986,000;
Letters of credit: $737,000;
Corporate guarantees: $0;
Certificates of deposit: $184,000;
Cash accounts: $27,800;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $1,000;
Total: $4,935,800.
State: Colorado;
Number of operations: 132;
Surety bonds: $1,600,000;
Letters of credit: $19,313;
Corporate guarantees: $0;
Certificates of deposit: $116,000;
Cash accounts: $1,600;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $1,736,913.
State: Idaho;
Number of operations: 55;
Surety bonds: $242,340;
Letters of credit: $305,050;
Corporate guarantees: $0;
Certificates of deposit: $140,969;
Cash accounts: $77,173;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $30,000;
Savings accounts: $0;
Total: $795,532.
State: Montana;
Number of operations: 180;
Surety bonds: $103,831,894;
Letters of credit: $3,996,803;
Corporate guarantees: $0;
Certificates of deposit: $708,081;
Cash accounts: $153,452;
State bond pools: $0;
Trust funds: $0;
Property: $617,700;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $109,307,930.
State: New Mexico;
Number of operations: 35;
Surety bonds: $3,307,406;
Letters of credit: $921,293;
Corporate guarantees: $0;
Certificates of deposit: $61,009;
Cash accounts: $9,281;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $4,308,289.
State: Nevada;
Number of operations: 774;
Surety bonds: $230,769,986;
Letters of credit: $192,058,810;
Corporate guarantees: $200,000,000;
Certificates of deposit: $1,931,761;
Cash accounts: $2,526,893;
State bond pools: $1,187,015;
Trust funds: $1,030,000;
Property: $0;
Negotiable U.S. securities: $180,000;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $629,684,465.
State: Oregon;
Number of operations: 175;
Surety bonds: $34,000;
Letters of credit: $0;
Corporate guarantees: $0;
Certificates of deposit: $16,000;
Cash accounts: $2,000;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $52,000.
State: Utah;
Number of operations: 216;
Surety bonds: $1,719,343;
Letters of credit: $365,699;
Corporate guarantees: $122,000;
Certificates of deposit: $393,034;
Cash accounts: $128,109;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $2,728,185.
State: Washington;
Number of operations: 139;
Surety bonds: [A];
Letters of credit: [A];
Corporate guarantees: [A];
Certificates of deposit: [A];
Cash accounts: [A];
State bond pools: [A];
Trust funds: [A];
Property: [A];
Negotiable U.S. securities: [A];
Negotiable U.S. bonds: [A];
Savings accounts: [A];
Total: [A].
State: Wyoming;
Number of operations: 56;
Surety bonds: $34,213,132;
Letters of credit: $39,318,254;
Corporate guarantees: $3,410,920;
Certificates of deposit: $443,000;
Cash accounts: $23,218;
State bond pools: $0;
Trust funds: $0;
Property: $0;
Negotiable U.S. securities: $0;
Negotiable U.S. bonds: $0;
Savings accounts: $0;
Total: $77,408,524.
Total;
Number of operations: 2,490;
Surety bonds: $383,506,864;
Letters of credit: $238,294,129;
Corporate guarantees: $203,532,920;
Certificates of deposit: $4,106,939;
Cash accounts: $3,188,869;
State bond pools: $2,187,015;
Trust funds: $1,030,000;
Property: $617,700;
Negotiable U.S. securities: $225,900;
Negotiable U.S. bonds: $30,000;
Savings accounts: $1,000;
Total: $836,721,336.
Source: GAO analysis of BLM survey responses.
[A] The BLM Oregon office did not provide information on the amount of
financial assurances available to reclaim the existing hardrock
operations it identified in Washington state on BLM land. The office
reported no individual bonds are used for operations in Washington
state, but that a statewide bond is held by the Washington state
Department of Ecology.
[End of table]
The information below describes the types of financial assurances
currently being used and BLM state offices' views of the effectiveness
of these assurances in minimizing losses to the federal government if
the operator does not complete reclamation.
Surety bonds. Surety bonds are a third party guarantee that an operator
purchases from an insurance company. As a third party with possible
financial responsibility for reclamation, the insurance company has a
strong incentive to monitor the operator's environmental safety record
and efforts to fulfill reclamation obligations. If the operator does
not complete required reclamation once operations cease, the insurance
company has the option of performing the reclamation work or paying the
financial assurance value to BLM or the designated state agency for
reclamation. According to industry representatives and experts,
insurance companies are amenable to issuing surety bonds for hardrock
operations for predictable reclamation activities that will occur in a
defined time frame. As table 2 shows, operators in 10 of the 12 states
with hardrock operations are using surety bonds. In 7 of these 10
states, BLM state offices rated surety bonds as "effective" or "very
effective" for minimizing losses to the federal government; in the
other three states, BLM state offices reported that they had no
experience (that is, they had not taken steps to obtain funds from the
financial assurance provider) in using this type of assurance in
minimizing losses to the federal government.[Footnote 24]
Letters of credit. Letters of credit, which hardrock operators
typically purchase from a bank or other financial institution, require
the institution to pay BLM or the designated state agency the value of
the letter of credit if the purchaser does not complete the required
reclamation. Depending on the financial condition of the operator, the
financial institution may require a deposit or collateral. Letters of
credit are used in nine states with hardrock operations. In seven of
these states, BLM state offices rated letters of credit as "moderately
effective" or "very effective" in minimizing losses to the federal
government; in the other two states, the BLM state offices reported
that they had no experience in using this type of assurance in
minimizing losses to the federal government.
Corporate guarantees. Corporate guarantees are promises by operators,
sometimes accompanied by a test of financial stability, to pay
reclamation costs, but do not require that funds be set aside to pay
such costs. Although BLM prohibits new corporate guarantees in its 2001
regulations, 3 of the 12 states had existing corporate guarantees that
were to cover almost one fourth of the total estimated reclamation
costs, as of July 2004. Most of these corporate guarantees--$200
million of the approximately $204 million--are for operations in
Nevada. The Nevada BLM state office rated corporate guarantees as "not
effective" for minimizing losses to the federal government. Operators
in Utah and Wyoming are also using corporate guarantees, although in
relatively smaller amounts of $122,000 and $3.4 million, respectively.
The Utah BLM state office reported that it has no experience in using
this type of financial assurance to minimize losses to the federal
government and therefore did not rate the effectiveness of this type of
assurance. The Wyoming BLM state office rated corporate guarantees as a
"very effective" financial assurance, although the office reported it
had no experience with an operation that had this type of financial
assurance and failed to reclaim the land.
State bond pools. Operators in two states--Alaska and Nevada--use state
bond pools to cover reclamation costs. According to Alaska BLM state
office officials, all hardrock operators on BLM land in Alaska
participate in the state bond pool.[Footnote 25] Operators in the
Alaska bond pool do not develop individual cost estimates for
reclaiming the land disturbed by their operations. The bond pool,
administered by the Alaska Department of Natural Resources, had $1
million in reclamation funds as of July 2004.[Footnote 26] According to
Alaska BLM state office officials, if the bond pool funds are not
sufficient to cover reclamation costs, the state of Alaska has agreed
to cover any additional costs. The Alaska BLM state office rated the
bond pool as "effective" in minimizing financial losses to the federal
government. The office also reported that to date no requests or claims
have been initiated to use bond pool funds for reclamation because
either BLM has successfully negotiated with the operators to have the
operations reclaimed, or the operations are pending further action.
The Nevada reclamation bond pool--which had about $1.2 million as of
July 2004--is open to operators on BLM or private lands. The state's
Division of Minerals administers this pool that was designed to help
smaller operations that may have difficulty securing other forms of
financial assurances. The Nevada bond pool does not establish the
amount of the assurance required for each operation; this is typically
done by BLM for operations on BLM land. The maximum bond amount for a
participant is $3 million.[Footnote 27] The Nevada BLM state office
rated the state's bond pool as "very effective" in minimizing financial
losses but noted that the pool had not been used as of our July 2004
survey. Subsequently, the office told us that the bond pool was used
for the first time in late 2004, when BLM requested funds from the pool
to reclaim a hardrock operation.
Certificates of deposit and savings accounts. Certificates of deposit
and savings accounts can be used to guarantee reclamation costs but
must not exceed the maximum amount insured by the Federal Deposit
Insurance Corporation. Operators use certificates of deposit in 10 of
the 12 states with hardrock operations. BLM state offices in 7 of these
10 states rated these assurances as "effective" or "very effective" in
minimizing losses to the federal government. Another state office rated
this type of assurances as "moderately effective" and noted that care
must be given to ensure that BLM is the beneficiary of the certificate.
In the other two states, the BLM state offices reported that they had
no experience with this type of assurance in minimizing losses to the
federal government. Operators in one state are using savings accounts,
and the BLM rated savings accounts as "very effective" for minimizing
losses to the federal government.
Cash accounts. Operators provide cash to BLM to guarantee reclamation
costs, and BLM must deposit and maintain this cash in a federal
depository account of the U.S. Treasury. Operators in 10 of the 12
states with hardrock operations use cash accounts. BLM state offices in
8 of these 10 states rated cash as "very effective" for minimizing
losses to the federal government. In the other two states, the offices
reported that they had no experience with using this type of assurance
to minimize losses to the federal government.
Trust funds. The 2001 regulations require operators, when BLM
identifies a need for it, to establish a trust fund or other funding
mechanism to ensure the continuation of long-term treatment to achieve
water quality standards and other long-term, post-mining requirements.
Funds are placed in an interest-bearing trust account by an operator
with BLM as the beneficiary. The trust account should accrue sufficient
funds to be sustained in perpetuity. The Nevada BLM state office
reported one trust fund with just over $1 million and said it did not
have sufficient experience to determine the effectiveness of this type
of assurance in minimizing losses to the federal government.
Property. The Montana BLM state office reported that one operator has
used $617,000 in property--consisting of 17 mining claims on private
land owned by the operator--as a financial assurance. According to BLM
state office officials, the operator pledged these properties as
collateral. The Montana BLM state office reported that it had no
experience using property to minimize losses to the federal government.
We note that the revised federal regulations do not identify property
as an acceptable type of financial assurance.
Negotiable U.S. securities and bonds. Operators in two states--Arizona
and Nevada--use negotiable U.S. securities. The Arizona BLM state
office reported it had no experience in using this type of assurance to
minimize losses to the federal government. The Nevada BLM state office
rated this type of assurance as "effective." The Idaho BLM state office
reported that operators in the state use U.S. bonds to guarantee
reclamation costs and that the state has no experience using bonds to
minimize losses to the federal government.
Although the $837 million in financial assurances that BLM reported is
the most complete information available, we note that this total may
not include all financial assurances for hardrock operations on BLM
land. Some BLM state offices had difficulty determining the value of
financial assurances for hardrock operations in their jurisdictions
when designated state agencies hold these assurances. For example, the
state offices reported the following:
* Washington. The Oregon BLM office did not provide the value of
financial assurances for the 139 hardrock operations it identified in
Washington state.
* California. The information the California BLM office provided may
not be complete because some financial assurances may be held by
California's 58 county agencies, and the state office did not contact
each county agency to complete our survey.
* Montana. The Montana BLM office does not track state-held financial
assurances for hardrock operations on BLM land. BLM obtained
information on these assurances for our survey from the state and
reported that this information was not all inclusive but appeared to be
reasonably accurate.
See appendix II for the number of notice-and plan-level hardrock
operations and associated financial assurances for each state
identified by BLM state offices, as of July 2004.
Existing Financial Assurances May Not Fully Cover Future Reclamation
Costs:
Existing financial assurances for reclaiming BLM land disturbed by
hardrock operations may not fully cover future reclamation costs for
the approximately 2,500 hardrock operations that BLM reported if
operators do not complete required reclamation. The costs may not be
fully covered because BLM reported that some of these operations do not
have financial assurances, and some have no or outdated reclamation
plans and/or cost estimates. BLM's explanations for this lack of
coverage indicate that some operators may not be complying with BLM
requirements.
As of July 2004, BLM state offices reported that some notice-or plan-
level operations in 9 of the 12 states with existing hardrock
operations did not have financial assurances. For example, BLM state
offices reported that in five states (Arizona, California, Idaho, New
Mexico, and Utah) more than 5 percent of both notice-and plan-level
operations did not have financial assurances. All of the operations in
two other states--Colorado and Wyoming--had financial assurances, and
the Oregon BLM state office reported that all plan-level operations in
Washington state had financial assurances, but the office did not know
the percentage of notice-level hardrock operations without financial
assurances in Washington state. Table 3 shows the number of notice-and
plan-level hardrock operations and the percentage of these operations
without financial assurances for each of the 12 states with existing
hardrock operations.
Table 3: Number of Notice-and Plan-Level Hardrock Operations and the
Percentage of These Operations BLM Reported Had No Financial
Assurances, by State, as of July 2004:
State: Alaska;
Number of notice-level hardrock operations: 134;
Percentage of notice-level hardrock operations without financial
assurances: 1-4%;
Number of plan-level hardrock operations: 106;
Percentage of plan-level hardrock operations without financial
assurances: 0%.
State: Arizona;
Number of notice-level hardrock operations: 130;
Percentage of notice-level hardrock operations without financial
assurances: 50-74%;
Number of plan-level hardrock operations: 55;
Percentage of plan-level hardrock operations without financial
assurances: 25-49%.
State: California;
Number of notice-level hardrock operations: 205;
Percentage of notice-level hardrock operations without financial
assurances: 5-14%;
Number of plan-level hardrock operations: 98;
Percentage of plan-level hardrock operations without financial
assurances: 15-24%.
State: Colorado;
Number of notice-level hardrock operations: 102;
Percentage of notice-level hardrock operations without financial
assurances: 0%;
Number of plan-level hardrock operations: 30;
Percentage of plan-level hardrock operations without financial
assurances: 0%.
State: Idaho;
Number of notice-level hardrock operations: 32;
Percentage of notice-level hardrock operations without financial
assurances: 5-14%;
Number of plan-level hardrock operations: 23;
Percentage of plan-level hardrock operations without financial
assurances: 5-14%.
State: Montana;
Number of notice-level hardrock operations: 150;
Percentage of notice-level hardrock operations without financial
assurances: 1-4%;
Number of plan-level hardrock operations: 30;
Percentage of plan-level hardrock operations without financial
assurances: 0%.
State: Nevada;
Number of notice-level hardrock operations: 450;
Percentage of notice-level hardrock operations without financial
assurances: 0%;
Number of plan-level hardrock operations: 324;
Percentage of plan-level hardrock operations without financial
assurances: 1-4%.
State: New Mexico;
Number of notice-level hardrock operations: 24;
Percentage of notice-level hardrock operations without financial
assurances: 15-24%;
Number of plan-level hardrock operations: 11;
Percentage of plan-level hardrock operations without financial
assurances: 15-24%.
State: Oregon;
Number of notice-level hardrock operations: 165;
Percentage of notice-level hardrock operations without financial
assurances: 1-4%;
Number of plan-level hardrock operations: 10;
Percentage of plan-level hardrock operations without financial
assurances: 0%.
State: Utah;
Number of notice-level hardrock operations: 167;
Percentage of notice-level hardrock operations without financial
assurances: 50-74%;
Number of plan-level hardrock operations: 49;
Percentage of plan-level hardrock operations without financial
assurances: 15-24%.
State: Washington;
Number of notice-level hardrock operations: 127;
Percentage of notice-level hardrock operations without financial
assurances: Do not know%;
Number of plan-level hardrock operations: 12;
Percentage of plan-level hardrock operations without financial
assurances: 0%.
State: Wyoming;
Number of notice-level hardrock operations: 18;
Percentage of notice-level hardrock operations without financial
assurances: 0%;
Number of plan-level hardrock operations: 38;
Percentage of plan-level hardrock operations without financial
assurances: 0.
Source: GAO analysis of BLM survey responses.
Note: Based on our analysis of survey responses, we identified the
range of percentages of hardrock operations that did not have financial
assurances in each of the states with hardrock operations. Those
percentage ranges were 0, 1-4, 5-14, 15-24, 25-49, 50-74, 75-99, and
100 percent.
[End of table]
For the states in which BLM state offices indicated that less than 100
percent of their hardrock operations had financial assurances, we asked
them to provide an explanation. While some of the explanations
indicated that financial assurances are not yet required for some
operations, such as those that are pending BLM acceptance or have not
yet begun exploration or mining, others indicated that the operations
may not be complying with BLM's requirements. The following
explanations provided by BLM state offices for the lack of financial
assurances suggest that some operators may not be complying with
applicable financial assurance requirements.
* Alaska. The operator failed to submit state bond pool fees on time.
* California. Some older operations may not have financial assurances.
* Idaho. The office could not find records of financial assurance for
two plan-level operations.
* Nevada. Some operations have been terminated by the state bond pool,
operators have gone bankrupt, or operations have been abandoned and the
operator cannot be found.
BLM state offices also reported that, as of July 2004, some hardrock
operations on BLM land have no or outdated reclamation plans and/or
reclamation cost estimates. Specifically, BLM state offices reported
that some existing hardrock operations in 9 of the 12 states did not
have reclamation plans and/or cost estimates. For example, BLM state
offices reported that in three states (Arizona, California, and Utah)
both types of operations (notice-and plan-level operations) were
missing some reclamation plans and cost estimates. In addition,
according to BLM state office officials, all hardrock operators on BLM
land in Alaska currently participate in the Alaska bond pool and do not
develop cost estimates. All of the operations in two other states--New
Mexico and Wyoming--had both reclamation plans and cost estimates, and
the Oregon BLM office reported that in Washington state all plan-level
operations have reclamation plans and cost estimates, but it did not
know the percentage of notice-level hardrock operations without plans
and estimates. Table 4 shows the percentage of BLM's notice-and plan-
level hardrock operations without reclamation plans and cost estimates,
as of July 2004.
Table 4: Reported Percentage of Notice-and Plan-Level Hardrock
Operations without Reclamation Plans and Cost Estimates, by State, as
of July 2004:
State: Alaska;
Percent of operations without reclamation plans: Notice-level: 1-4%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 100%[A];
Percent of operations without cost estimates: Plan-level: 100%[A].
State: Arizona;
Percent of operations without reclamation plans: Notice-level: 50-74%;
Percent of operations without reclamation plans: Plan-level: 25-49%;
Percent of operations without cost estimates: Notice-level: 50-74%;
Percent of operations without cost estimates: Plan-level: 25-49%.
State: California;
Percent of operations without reclamation plans: Notice-level: 1-4%;
Percent of operations without reclamation plans: Plan-level: 15-24%;
Percent of operations without cost estimates: Notice-level: 15-24%;
Percent of operations without cost estimates: Plan-level: 1-4%.
State: Colorado;
Percent of operations without reclamation plans: Notice-level: 5-14%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 0%;
Percent of operations without cost estimates: Plan-level: 0%.
State: Idaho;
Percent of operations without reclamation plans: Notice-level: 0%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 5-14%;
Percent of operations without cost estimates: Plan-level: 1-4%.
State: Montana;
Percent of operations without reclamation plans: Notice-level: 0%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 1-4%;
Percent of operations without cost estimates: Plan-level: 0%.
State: Nevada;
Percent of operations without reclamation plans: Notice-level: 0%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 0%;
Percent of operations without cost estimates: Plan-level: 1-4%.
State: New Mexico;
Percent of operations without reclamation plans: Notice-level: 0%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 0%;
Percent of operations without cost estimates: Plan-level: 0%.
State: Oregon;
Percent of operations without reclamation plans: Notice-level: 1-4%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 1-4%;
Percent of operations without cost estimates: Plan-level: 0%.
State: Utah;
Percent of operations without reclamation plans: Notice-level: 50-74%;
Percent of operations without reclamation plans: Plan-level: 15-24%;
Percent of operations without cost estimates: Notice-level: 50-74%;
Percent of operations without cost estimates: Plan-level: 15-24%.
State: Washington;
Percent of operations without reclamation plans: Notice-level: Do not
know;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: Do not
know;
Percent of operations without cost estimates: Plan-level: 0%.
State: Wyoming;
Percent of operations without reclamation plans: Notice-level: 0%;
Percent of operations without reclamation plans: Plan-level: 0%;
Percent of operations without cost estimates: Notice-level: 0%;
Percent of operations without cost estimates: Plan-level: 0%.
Source: GAO analysis of BLM survey responses.
Note: Based on our analysis of survey responses, we identified the
ranges of the percentages of hardrock operations that did not have
reclamation plans and cost estimates in each of the states with
hardrock operations. Those ranges were 0, 1-4, 5-14, 15-24, 25-49, 50-
74, 75-99, and 100 percent.
[A] All of the Alaska operations are covered by the Alaska state bond
pool and do not develop cost estimates.
[End of table]
For the states in which BLM state offices reported that less than 100
percent of their operations had reclamation plans and/or cost
estimates, we asked BLM to provide an explanation. All notice-and plan-
level operations are required to have reclamation plans and cost
estimates. The following explanations provided by BLM state offices for
the lack of reclamation plans and/or cost estimates suggest that some
operators may not be complying with financial assurance requirements.
* Arizona. Some of the older plan-level operations may still have
financial assurances that were calculated on the basis of $2,000 per
acre, which was the policy under previous federal regulations, rather
than all of the estimated costs of reclamation as the 2001 regulations
now require.
* Colorado. No reclamation plan was required when some of the notices
were submitted.
* Idaho. A record of a cost estimate for two plans could not be found.
* Oregon. Not all of the notice-level operations have a reclamation
plan because of a general backlog in updating reclamation plans, and
reclamation cost estimates are still being developed in a few cases.
In addition, three state offices reported that some reclamation plans
and cost estimates had not been updated. For example, the California
BLM state office reported that some of the older reclamation plans for
operations in that state have not been updated because of a workload
backlog and staff vacancies. Consequently, these plans and estimates
may not provide a sound basis for establishing financial assurances to
cover all future reclamation costs.
Like our survey results, the results of the 2004 BLM survey of 18 of
its 157 field offices showed that some hardrock mining operations under
the jurisdiction of 7 field offices did not have financial assurances
that met BLM's requirements in fiscal year 2003. For example, one field
office reported that it did not have financial assurances that met
BLM's requirements because none of the reclamation cost estimates for
plan-level operations included indirect costs. Another field office had
a backlog of nearly 80 plan-level operations that had not had their
reclamation cost estimates updated because, among other things, the
office did not have sufficiently trained staff to review updates. In
yet another field office, higher priority work prevented timely updates
of some reclamation cost estimates.
Financial Assurances Were Not Always Adequate to Pay All Estimated
Costs for Required Reclamation for Hardrock Operations That Had Ceased
and Not Been Reclaimed by Operators:
BLM identified 48 hardrock operations on BLM land that had ceased and
not been reclaimed by operators since it began requiring financial
assurances. BLM reported that the most recent cost estimates for
reclamation required by applicable plans and federal regulations for 43
of these operations totaled about $136 million, with no adjustment for
inflation; it did not report reclamation cost estimates for the other 5
operations.[Footnote 28] However, as of July 2004, financial assurances
had provided or were guaranteeing $69 million, and federal agencies and
others had provided $10.6 million to pay estimated reclamation costs
for the 48 operations, leaving $56.4 million of reclamation costs
unfunded. In particular, financial assurances were not adequate to pay
all estimated costs for required reclamation for 25 of the 48
operations because (1) some operations had no assurances, (2) some
operations' assurances were less than the most recent reclamation cost
estimates, and (3) some financial assurance providers declared
bankruptcy and could not pay. In addition, for about half of the
remaining 23 operations, cost estimates may be understated because the
cost estimates may not have been updated to reflect inflation or other
factors that could increase reclamation costs. Furthermore, the $136
million cost estimate is understated to the extent that BLM did not
identify or report information on all hardrock operations that had
ceased and not been reclaimed by operators as required. Finally,
according to BLM officials, required reclamation had been completed for
only 5 of the 48 operations as of July 2004, but they believe it is
likely that required reclamation will be completed for 28 of the
remaining 43 operations.
BLM Identified 48 Hardrock Operations That Had Ceased and Not Been
Reclaimed by Operators Since It Began Requiring Financial Assurances
and About $136 Million in Estimated Costs for Required Reclamation:
BLM identified 48 hardrock operations in seven states that had ceased
and not been reclaimed by operators, as required by applicable
reclamation plans and federal regulations, since it began requiring
financial assurances.[Footnote 29] The number of operations BLM
identified in each of the seven states, along with the primary minerals
explored, mined, and/or processed, and the operating authority for the
48 operations are shown in table 5. Appendix III, table 14, contains
additional information about these operations.
Table 5: Number and Selected Characteristics of 48 Hardrock Operations
Reported by BLM as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, by State, as of July 2004:
States: Alaska;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 4;
Primary hardrock minerals being explored, mined, or processed: Gold: 4;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 0;
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 0;
Authority: Plan-level: 4;
Authority: Notice-level: 0.
States: Arizona;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 6;
Primary hardrock minerals being explored, mined, or processed: Gold: 6;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 0;
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 0;
Authority: Plan-level: 5;
Authority: Notice-level: 1.
States: California;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 2;
Primary hardrock minerals being explored, mined, or processed: Gold: 2;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 0;
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 0;
Authority: Plan-level: 2;
Authority: Notice-level: 0.
States: Idaho;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 1;
Primary hardrock minerals being explored, mined, or processed: Gold: 0;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 1[A];
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 0;
Authority: Plan-level: 1;
Authority: Notice-level: 0.
States: Montana;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 3;
Primary hardrock minerals being explored, mined, or processed: Gold: 3;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 0;
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 0;
Authority: Plan-level: 2;
Authority: Notice-level: 1.
States: Nevada;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 29;
Primary hardrock minerals being explored, mined, or processed: Gold:
25;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 4[B];
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 0;
Authority: Plan-level: 26;
Authority: Notice-level: 3.
States: Washington;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 3;
Primary hardrock minerals being explored, mined, or processed: Gold: 1;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 0;
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 2;
Authority: Plan-level: 3;
Authority: Notice-level: 0.
States: Total;
Number of hardrock operations reported by BLM as ceased and not
reclaimed by operators: 48;
Primary hardrock minerals being explored, mined, or processed: Gold:
41;
Primary hardrock minerals being explored, mined, or processed: Other
minerals: 5;
Primary hardrock minerals being explored, mined, or processed:
Unidentified: 2;
Authority: Plan-level: 43;
Authority: Notice-level: 5.
Source: GAO analysis of BLM survey responses.
[A] The primary mineral explored and mined at this operation was
limestone.
[B] The primary mineral was different for each of these four
operations: one mined copper, another silver, and a third zinc; the
fourth was a mill site for platinum/gold.
[End of table]
According to BLM officials in each of the seven states, BLM had taken
steps to compel operators of most of the 48 operations to reclaim BLM
land. For example, it had sent notices of noncompliance (24 operations)
and taken administrative, legal, or other actions (19 other
operations), such as revoking plans of operations. BLM took no action
to compel reclamation of the remaining five operations. However, none
of the operators for these 48 operations completed reclamation,
primarily because of bankruptcy (30 operations). Appendix III, table
16, details the actions BLM took to compel operators to complete
reclamation and the reasons reclamation was not completed.
BLM reported reclamation cost estimates for 43 of the 48 operations
that had ceased and not been reclaimed by the operators; it did not
report estimates for the other 5 operations--2 in Alaska, 2 in Nevada,
and 1 in Arizona. The most recent estimates as of July 2004 indicated
that the total reclamation cost for the 43 operations was about $136
million.[Footnote 30] Almost 99 percent of this estimated cost was
associated with operations in Montana and Nevada--primarily for the
Zortman and Landusky mining operation in Montana ($85 million) and the
Paradise Peak operation ($21.2 million) and MacArthur Mine operation
($17 million) in Nevada. Clearly, the total cost estimate would be
higher if the costs for the 5 operations with no estimates were
included. The number of hardrock operations for which BLM reported cost
estimates and the value of the most recent cost estimates, as of July
2004, for each of the seven states is shown in table 6. Appendix III,
table 17, provides the reported estimates for each of the 43
operations.
Table 6: Cost Estimates for Required Reclamation of 43 Hardrock
Operations with Cost Estimates Reported by BLM as Ceased and Not
Reclaimed by Operators Since BLM Began Requiring Financial Assurances,
by State, as of July 2004:
State: Alaska;
Number of hardrock operations with cost estimates: 2;
Most recent BLM-reported reclamation cost estimates: $639,000.
State: Arizona;
Number of hardrock operations with cost estimates: 5;
Most recent BLM-reported reclamation cost estimates: $944,439.
State: California;
Number of hardrock operations with cost estimates: 2;
Most recent BLM-reported reclamation cost estimates: $17,431.
State: Idaho;
Number of hardrock operations with cost estimates: 1;
Most recent BLM-reported reclamation cost estimates: $12,000.
State: Montana;
Number of hardrock operations with cost estimates: 3;
Most recent BLM-reported reclamation cost estimates: $85,502,013.
State: Nevada;
Number of hardrock operations with cost estimates: 27;
Most recent BLM-reported reclamation cost estimates: $48,840,972.
State: Washington;
Number of hardrock operations with cost estimates: 3;
Most recent BLM-reported reclamation cost estimates: $33,825.
Total;
Number of hardrock operations with cost estimates: 43;
Most recent BLM-reported reclamation cost estimates: $135,989,680.
Source: GAO analysis of BLM survey responses.
[End of table]
Financial Assurances and Funds Provided by Others Were Not Adequate to
Pay All of the Estimated $136 Million in Costs for Required
Reclamation:
Financial assurances and funds provided by others were not adequate to
pay all of the estimated $136 million needed to complete the required
reclamation of the 43 operations for which BLM reported cost estimates.
Surety bonds and other types of financial assurances had provided or
were guaranteeing $69 million of the estimated costs for required
reclamation that BLM reported for these operations, or about 51
percent. According to our analysis of information BLM officials
provided in response to our survey, these funds were not adequate to
pay all estimated costs for required reclamation for 25 of the 48
operations. Moreover, cost estimates may be understated for 12 of the
other 23 operations. In addition, funds provided by federal agencies
and others paid only a fraction of the estimated reclamation costs. As
a result, at least $56.4 million, or about 41 percent, of the estimated
$136 million needed for required reclamation was unfunded, as shown in
figure 5. Finally, the $136 million cost estimate for required
reclamation is understated to the extent that BLM did not identify or
report information on all hardrock operations that had ceased and not
been reclaimed, as required.
Figure 5: Sources and Amount of Funds Provided or Guaranteed to Pay
Estimated $136 Million in Costs for Required Reclamation for Operations
that BLM Identified as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, as of July 2004:
[See PDF for image]
[A] The $56.4 million of unfunded costs includes $4,233,465 in
corporate guarantees that lost their value when the operator that
guaranteed reclamation costs went bankrupt and had no funds to pay
reclamation costs and $949,350 that was not relinquished by a
financially-troubled surety bond provider. When the $56.4 million in
unfunded costs is added to the $10.6 million from others, a total of
$67 million, or about 49 percent of the total estimated cost, was not
guaranteed by financial assurances.
[End of figure]
Types of Financial Assurances Varied but Were Not Adequate to Pay About
Half of the Estimated Costs Needed for Required Reclamation:
Operators used a variety of types of financial assurances for 38
operations to pay or guarantee coverage of $74.2 million of the $136
million of estimated costs for required reclamation, as table 7 shows.
(The remaining 10 operations had no financial assurances.) Operators
used surety bonds, a trust fund, and corporate guarantees to guarantee
almost 97 percent of these costs, with the rest guaranteed by state
bond pools, letters of credit, certificates of deposit, cash, and a
construction bond provided by an operator. However, as of July 2004,
financial assurances had provided or were guaranteeing only $69
million, or almost 51 percent, of the reclamation costs. This amount
decreased because $4.2 million in corporate guarantees had lost all
their value when the operator that guaranteed the reclamation costs
declared bankruptcy and had no funds to pay such costs, and $949,350
was not available from a surety bond because the financially-troubled
financial assurance provider paid for reclamation instead of
relinquishing the bond. See appendix III, table 18, for the types of
financial assurances used for each hardrock operation.
Table 7: Type and Value of Financial Assurances Used by Operators to
Guarantee Reclamation Costs for 38 Operations with Financial Assurances
that BLM Identified as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, as of July 2004:
Type of financial assurance: Surety bonds[B];
Number of operations with financial assurances[A]: 22;
Value of financial assurances: $55,294,010.
Type of financial assurance: Trust funds;
Number of operations with financial assurances[A]: 1;
Value of financial assurances: $12,300,000.
Type of financial assurance: Corporate guarantees[C];
Number of operations with financial assurances[A]: 3;
Value of financial assurances: $4,233,465.
Type of financial assurance: Operator's construction bond;
Number of operations with financial assurances[A]: 1;
Value of financial assurances: $2,000,000.
Type of financial assurance: State bond pools[D];
Number of operations with financial assurances[A]: 8;
Value of financial assurances: $340,573.
Type of financial assurance: Letters of credit;
Number of operations with financial assurances[A]: 2;
Value of financial assurances: $18,500.
Type of financial assurance: Certificates of deposit;
Number of operations with financial assurances[A]: 3;
Value of financial assurances: $17,431.
Type of financial assurance: Cash;
Number of operations with financial assurances[A]: 3;
Value of financial assurances: $7,076.
Type of financial assurance: Total[E];
Number of operations with financial assurances[A]: 38[E];
Value of financial assurances: $74,211,046.
Type of financial assurance: Less financial assurances with no value;
Number of operations with financial assurances[A]: [B,C];
Value of financial assurances: ($5,182,815).
Type of financial assurance: Total;
Number of operations with financial assurances[A]: 38[E];
Value of financial assurances: $69,028,231.
Source: GAO analysis of BLM survey responses.
[A] Ten of the 48 operations had no financial assurances.
[B] As of July 2004, one security provider had financial problems and
contracted for reclamation instead of relinquishing bond funds.
[C] As of July 2004, these three corporate guarantees had lost all
their value because the operator that guaranteed the reclamation costs
had gone bankrupt and had no funds to pay reclamation costs. However,
these operations also had surety bonds that maintained their value.
[D] This is the value for six of the eight hardrock operations; BLM did
not provide the value for the other two operations.
[E] Does not add because some operations had more than one type of
financial assurance.
[End of table]
These 38 financial assurances provided or guaranteed funds for only
about half of the estimated costs for required reclamation for the 48
hardrock operations. Specifically, these financial assurances were not
adequate for 25 of the 48 operations because (1) operators did not
provide financial assurances for 10 hardrock operations, (2) the
financial assurances that were provided were less than the most recent
cost estimates for 13 operations, and/or (3) the financial assurance
providers declared bankruptcy and did not have the funds to pay all
reclamation costs for two other operations. (Also, 2 of the 13
operations whose financial assurances were less than the most recent
cost estimates went bankrupt.) Table 8 shows the reasons financial
assurances were not adequate and the associated funding differential.
Table 8 also shows that most of the difference between the value of the
estimated reclamation costs and the value of the financial assurances
occurred because the financial assurances were less than the most
recent cost estimate.
Table 8: Reasons Financial Assurances Were Not Adequate to Pay
Estimated Costs for Required Reclamation for 25 Hardrock Operations
Identified by BLM as Ceased and Not Reclaimed by Operators Since BLM
Began Requiring Financial Assurances, as of July 2004:
Reason for inadequate financial assurances: Operations had no financial
assurances;
Number of affected hardrock operations: 10[A];
Value of estimated reclamation costs: $2,001,014;
Value of financial assurances: $0;
Funding differential: ($2,001,014).
Reason for inadequate financial assurances: Financial assurances less
than most recent cost estimates;
Number of affected hardrock operations: 13;
Value of estimated reclamation costs: $128,187,236;
Value of financial assurances: $64,445,305;
Funding differential: ($63,741,931).
Reason for inadequate financial assurances: Bankrupt financial
assurance providers;
Number of affected hardrock operations: 4[B];
Value of estimated reclamation costs: $1,688,006;
Value of financial assurances: $2,638,017;
Funding differential: $950,011.
Reason for inadequate financial assurances: Subtotal;
Number of affected hardrock operations: 25[C];
Value of estimated reclamation costs: $131,876,256;
Value of financial assurances: $67,083,322;
Funding differential: ($64,792,934).
Reason for inadequate financial assurances: Less financial assurances
with no value;
Number of affected hardrock operations: [D];
Value of financial assurances: $(5,182,815);
Funding differential: ($5,182,815).
Total;
Number of affected hardrock operations: 25;
Value of estimated reclamation costs: $131,876,256;
Value of financial assurances: $61,900,507;
Funding differential: ($69,975,749).
Source: GAO analysis of BLM survey responses.
[A] Includes one operation with no reported cost estimate.
[B] Four operations were affected by bankrupt financial assurances
providers. The $1.7 million and $2.6 million are the values for
estimated reclamation costs and associated financial assurances,
respectively, for two of these operations--County Line and Olinghouse.
For the other two operations--the MacArthur Mine and the Paradise Peak
operations--the values for the estimated reclamation costs ($38.2
million) and the associated financial assurances ($4.8 million) are
included with the 13 operations for which financial assurances were
less than the most recent cost estimates.
[C] Does not add because two of these operations also had financial
assurances that were less than the most recent cost estimate.
[D] As of July 2004, three of the four operations affected by
bankruptcy used corporate guarantees that had lost all their value
because the operator that guaranteed the reclamation costs was bankrupt
and one surety bond provider did not relinquish bond funds because the
provider went bankrupt.
[End of table]
No Financial Assurances:
As table 8 shows, 10 hardrock operations had no financial assurances.
These operations were located in Washington (2), Arizona (4), and
Nevada (4). The most recent reclamation cost estimates for 9 of these
10 operations indicated that slightly over $2 million in reclamation
costs was unfunded; BLM reported no cost estimate for the other
operation. BLM officials provided the following explanations for why
the 10 operations did not have the required financial assurances:
* Two operations in Washington. An official in Oregon's BLM state
office, which manages BLM programs in Oregon and Washington, said that
two operations in Washington did not have financial assurances,
probably because the responsible BLM field office did not have adequate
staff to enforce compliance with this requirement. The official also
said that financial assurance training had been a problem and that
staff turnover in one field office meant that financial assurances were
overlooked for a period of time.
* Four operations in Arizona. According to BLM state office officials,
the operators of two operations did not provide financial assurances,
even though BLM told them that financial assurances were required.
According to an official in the BLM state office, the heavy workloads
associated with other BLM programs dissuaded staff from taking
enforcement actions that could involve time-consuming activities, such
as obtaining court orders. Furthermore, the official said that case
files indicated the third operation had financial assurances sometime
during the 1990s, but information on the type and amount of financial
assurances after it ceased could not be found. No reason was given for
the fourth operation.
* Four operations in Nevada. According to BLM state office officials,
operators of three operations did not provide financial assurances,
even though BLM notified the operators that financial assurances were
required. At one of these operations, for example, BLM's field office
issued a noncompliance order that, after the operator appealed it, was
upheld by the BLM state office. BLM is currently working with the state
of Nevada to reclaim this operation. BLM state office officials said
that the operator of another operation, who eventually went bankrupt,
was never able to provide a suitable financial assurance instrument.
Regarding the fourth operation--Relief Canyon--officials in BLM's
responsible field office told us that the operator refused to provide
financial assurances despite the field office's enforcement steps. The
field office issued a noncompliance order and took other enforcement
actions, such as revoking the operator's plan of operation.
The Relief Canyon gold mine is located in north-central Nevada on about
344 acres, including 295 acres of BLM land. According to BLM officials,
the mine was being reclaimed when a new operator purchased it in 1995
and, at that time, the agency advised the new operator of the need for
financial assurances for all required reclamation--including past and
future disturbances. However, the operator never obtained the financial
assurances. According to BLM, the mine's plan of operation was last
updated in October 1996, and before the operation ceased, the operator
estimated reclamation costs at about $889,000. BLM reported that, as of
July 2004, 26 to 50 percent of the operation had been reclaimed. BLM
officials told us that they had revoked the mine's plan of operation,
operations had ceased, and the operator should complete reclamation,
but the operator has appealed this revocation to Interior's Board of
Land Appeals. The operator contends that he plans to either begin
mining operations when he gets the funds or sell the operation. When we
visited the operation in September 2004, we did not see any signs of
ongoing mining activity and observed that buildings, collection pond
liners, the security fence, and other structural facilities needed
repair. As of June 2005, BLM was awaiting the board's decision.
Financial Assurances Were Less Than Recent Cost Estimates:
As table 8 also shows, 13 operations had financial assurances that were
less than the most recent cost estimates. These operations were located
in Alaska (1), California (1), Montana (1), and Nevada (10). The most
recent cost estimate for these 13 operations was $128.19 million, and
the value of the associated financial assurances was $64.45 million,
leaving $63.74 million of the estimated reclamation costs with no
financial assurance coverage. Table 9 shows the most recent cost
estimates, compared with the value of financial assurances for each of
the 13 operations. Three mining operations--Zortman and Landusky,
MacArthur Mine and Paradise Peak--accounted for about 95 percent of the
amount that the cost estimates exceeded the financial assurances.
Table 9: Comparison of Most Recent Cost Estimate as of July 2004 with
the Value of Financial Assurances for 13 Hardrock Operations with Cost
Estimates That Exceeded Financial Assurances:
Hardrock operation: Gold Hill Mining;
Location: Alaska;
Most recent cost estimate: $500,000;
Value of financial assurances: $15,000;
Amount cost estimate exceeded financial assurance: $485,000.
Hardrock operation: Nina;
Location: California;
Most recent cost estimate: $15,000;
Value of financial assurances: $5,000;
Amount cost estimate exceeded financial assurance: $10,000.
Hardrock operation: Zortman and Landusky Mine;
Location: Montana;
Most recent cost estimate: $85,200,000;
Value of financial assurances: $57,800,000;
Amount cost estimate exceeded financial assurance: $27,400,000.
Hardrock operation: Wildhorse Canyon;
Location: Nevada;
Most recent cost estimate: $53,000;
Value of financial assurances: $12,000;
Amount cost estimate exceeded financial assurance: $41,000.
Hardrock operation: South Hy/Isabella;
Location: Nevada;
Most recent cost estimate: $169,700;
Value of financial assurances: $22,000;
Amount cost estimate exceeded financial assurance: $147,700.
Hardrock operation: Golden Butte;
Location: Nevada;
Most recent cost estimate: $1,397,000;
Value of financial assurances: $328,942;
Amount cost estimate exceeded financial assurance: $1,068,058.
Hardrock operation: Easy Jr;
Location: Nevada;
Most recent cost estimate: $668,936;
Value of financial assurances: $365,917;
Amount cost estimate exceeded financial assurance: $303,019.
Hardrock operation: Kinsley;
Location: Nevada;
Most recent cost estimate: $1,400,000;
Value of financial assurances: $911,763;
Amount cost estimate exceeded financial assurance: $488,237.
Hardrock operation: Phoenix Metals USA II Inc;
Location: Nevada;
Most recent cost estimate: $100,000;
Value of financial assurances: $45,904;
Amount cost estimate exceeded financial assurance: $54,096.
Hardrock operation: American Canyon KOF;
Location: Nevada;
Most recent cost estimate: $21,600;
Value of financial assurances: $5,314;
Amount cost estimate exceeded financial assurance: $16,286.
Hardrock operation: 16:1 Millsite;
Location: Nevada;
Most recent cost estimate: $458,000;
Value of financial assurances: $124,017;
Amount cost estimate exceeded financial assurance: $333,983.
Hardrock operation: MacArthur Mine[A];
Location: Nevada;
Most recent cost estimate: $17,047,000;
Value of financial assurances: $184,300;
Amount cost estimate exceeded financial assurance: $16,862,700.
Hardrock operation: Paradise Peak[A];
Location: Nevada;
Most recent cost estimate: $21,157,000;
Value of financial assurances: $4,625,148;
Amount cost estimate exceeded financial assurance: $16,531,852.
Hardrock operation: Total;
Location: [Empty];
Most recent cost estimate: $128,187,236;
Value of financial assurances: $64,445,305;
Amount cost estimate exceeded financial assurance: $63,741,931.
Source: GAO analysis of BLM survey responses.
[A] Part of these financial assurances were corporate guarantees that
lost their value when the operator that guaranteed reclamation costs
went bankrupt.
[End of table]
For these 13 hardrock operations, we identified several reasons why
financial assurances were less than the most recent reclamation cost
estimate. In particular:
* Estimates at the time operations ceased for 6 of the 13 operations
did not consider all costs. BLM reported that some estimates excluded
BLM administrative or indirect costs, interim maintenance costs, long-
term maintenance and monitoring costs, costs for inflation, and/or
other costs. For example, estimates for five operations did not include
sufficient funds to cover BLM administrative or indirect costs, which
can be high, especially if BLM gets involved with bankruptcy
procedures. In its guidance on preparing cost estimates BLM states that
estimates should include (1) costs for contract administration, which
should be between 6 and 10 percent of estimated operations and
maintenance costs, depending on the size of the operation, and (2)
indirect costs, which should be 21 percent of the contract
administration costs.
* One operator intentionally understated reclamation costs for an
operation to minimize the amount of financial assurances required,
according to BLM field office officials in Nevada. They said, for
example, that the operator calculated the estimate as if very large
equipment were going to be used, which would reduce costs; however, the
operator did not have such equipment available in the state. The field
office officials said that the BLM staff who reviewed the cost estimate
were inexperienced and did not detect the understatement.
* Reclamation plans and cost estimates sometimes were not updated to
reflect all reclamation costs when the scope of the plan of operations
changed and, as a result, the reclamation requirements changed. For
example, BLM reported that the amount of financial assurances for the
Zortman and Landusky mining operation in Montana was significantly less
than the cost estimate prepared after the operations ceased. The
difference in costs was due in part to the failure to update the
reclamation plan to address acid rock drainage found during an
inspection in the early 1990s, despite efforts by the operator to
update the plan. Specifically, the most recent cost estimate for water
treatment is greater than the estimate prepared before operations
ceased. In addition, the cost estimate increased because the revised
reclamation plan required more extensive work on the heap-leach pad
than in the earlier plan. Approval of the plan was delayed until 2002
by the review process and litigation over the effects of the proposed
changes, and by that time the operator had declared bankruptcy.
According to the Montana Department of Environmental Quality, which
jointly manages the hardrock operation with BLM, the value of the
financial assurances increased during this period. However, the most
recent reclamation cost estimate was still greater than the associated
financial assurances. An estimate of $85.2 million for reclamation
costs was prepared after operations ceased and addressed water
contamination and other reclamation activities, such as backfilling,
regrading, and revegetating. This estimate included $36.3 million for
earthworks, $22 million for water treatment through 2017, and $26.9
million for long-term water monitoring and treatment, according to BLM
field office officials. This estimate was $27.4 million more than the
$57.8 million in financial assurances provided for the reclamation. The
financial assurances consisted of $29.6 million in surety bonds for
earthworks, a $2 million construction assurance bond for water
treatment facilities, $13.9 million in surety bonds for water treatment
through 2017, and $12.3 million in a trust fund for long-term water
treatment and monitoring. Part of the funding shortfall--about $8.7
million--was covered with funds from other sources.
Financial Assurance Providers Declared Bankruptcy:
For four operations in Nevada, as table 8 shows, financial assurances
were not adequate because financial assurance providers went bankrupt
and could not pay all the reclamation costs they guaranteed. For three
of these operations--Paradise Peak, County Line, and MacArthur Mine--an
operator used corporate guarantees totaling $4.2 million to guarantee
part of the estimated reclamation costs. However, these corporate
guarantees lost all their value when the operator went bankrupt.
Reclamation costs for the fourth operation were guaranteed with a
surety bond underwritten by a company that went bankrupt and spent
$850,650 for partial reclamation of the operation instead of
relinquishing the $1.8 million surety bond. In particular:
* Paradise Peak, a mining operation in central Nevada, used heap
leaching to extract gold from ore. When the operation ceased, it
covered almost 1,000 acres, about half of which was on BLM land. The
plan of operation was last updated in May 1996, and in November 1995,
the operator estimated that reclamation costs would be $5,462,000. The
operator, Arimetco Inc., provided financial assurances totaling
$4,625,000--$1,157,000 in a surety bond and $3,468,000 in a corporate
guarantee that lost all of its value when Arimetco went bankrupt. As of
July 2004, the surety bond company had relinquished the $1,157,000, but
none of the funds had been spent. BLM reported that estimated
reclamation costs were $21,157,000--$20 million more than the funds the
surety bond company relinquished. This estimated cost is significantly
more than the original estimate, according to BLM state office
officials, because the original estimate did not include all costs that
it should have, such as costs for reclaiming collection ponds, and
because the cost estimate was not updated to reflect changes in the
reclamation plan. BLM reported that no reclamation had been done as of
July 2004, but it was very likely that reclamation would be completed
because a portion of the needed funding was obtained through bankruptcy
procedures and BLM was working with the operator to perform
reclamation.
* County Line Project, located on 130 acres of BLM land in western
Nevada, used heap leaching to extract gold from ore. The plan of
operation was last updated in January 1992, when the operator estimated
that reclamation costs would be about $837,000. BLM reported no more
recent reclamation cost estimates. Arimetco Inc., the operator,
provided $838,000 in financial assurances--$210,000 in surety bonds and
$628,000 in a corporate guarantee that lost all of its value after
Arimetco went bankrupt. As of July 2004, the surety bond company had
relinquished the $210,000, but none of the funds had been
spent.[Footnote 31] BLM reported that, as of July 2004, between 26
percent and 50 percent of the operation had been reclaimed. BLM also
reported that it was very unlikely that reclamation would ever be
completed because it was unlikely that the operator would remain viable
after bankruptcy.[Footnote 32]
* The MacArthur Mine covers about 550 acres, over three-quarters of
which are on BLM land. The MacArthur Mine was purchased by Arimetco in
1988. This copper mine consisted of a pit, waste dump, and roads used
to haul ore from the pit to three heap-leach pads that Arimetco
constructed on the nearby Yerington Mine, which was also on BLM land,
to extract copper from the MacArthur ore.[Footnote 33] BLM reported
that Arimetco began operating the MacArthur Mine in 1992 and ceased
operations in 1997, after it filed for bankruptcy. BLM also reported
that the plan of operation was last updated in 1995 and that Arimetco
had no reclamation cost estimate before operations ceased. Further, BLM
provided documents that showed the MacArthur reclamation plan covered
not only the MacArthur land but also the heap-leach pads at the
Yerington Mine. Although Arimetco had no cost estimate, it did have
$184,300 in financial assurances--$47,000 in a surety bond and $137,300
in a corporate guarantee that had lost all of its value when Arimetco
went bankrupt. BLM reported that, as of July 2004, the $47,000 in
surety bond funds had been relinquished but not spent. BLM also
reported that estimated reclamation costs would be $17,047,000--$17
million more than the funds relinquished by the surety bond company.
This estimate, according to an official in a BLM Nevada field office,
was prepared by the state of Nevada for bankruptcy procedures. BLM
reported that, as of July 2004, no reclamation of the MacArthur
operation had been undertaken or completed and that it was very
unlikely reclamation of this operation would occur. However, in March
2005, the BLM official told us that the Yerington Mine, including the
leach heaps built and used by Arimetco for the MacArthur operation,
would be cleaned up under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (CERCLA).[Footnote
34] CERCLA governs cleanup of severely contaminated hazardous waste
sites.[Footnote 35]
* The Olinghouse Mine operation, a exploration and mining operation in
northwest Nevada, used heap leaching to extract gold from ore on 502
acres, of which 447 acres were BLM land. The plan of operation was last
updated in September 2002, and the operator estimated that reclamation
costs would be about $851,000. BLM has not reported any more recent
cost estimates. Alta Gold Company, the operator of the Olinghouse
operation and eight other hardrock operations in Nevada, provided
financial assurances to guarantee reclamation of all nine operations
through a statewide surety bond underwritten by the Frontier Insurance
Company (Frontier). In April 1999, Alta Gold Company filed for
bankruptcy, and BLM gave Frontier the option of paying or performing
reclamation. Subsequently, the insurance company filed for bankruptcy
and was put into "rehabilitation"--a term for bankruptcy with the
intent of making the company solvent. In October 2001, Frontier offered
to reclaim the operation to a "satisfactory level." According to BLM,
its options were to (1) wait upon the bankruptcy court, with no
guarantee to obtain funds or (2) find an alternative solution to
reclaim most of the land. BLM entered into an agreement with Frontier
for it to perform reclamation using contractors, with BLM oversight.
Frontier completed the agreed-upon reclamation by February 2003, and in
December 2003, BLM released the company from future financial
obligations for this operation. Frontier performed the reclamation for
$850,650, which was significantly less than the $1.8 million surety
bond that it would have relinquished if Frontier had not performed the
reclamation. BLM state and field office officials told us that this
solution was satisfactory to all parties, even though all reclamation
required by the reclamation plan was not completed. BLM reported that,
as of July 2004, 86 to 95 percent of the reclamation had been
completed, but it was very unlikely that the remaining reclamation
would ever be completed. For example, BLM reported that all exploration
roads were not reclaimed.
Financial Assurances for 12 Hardrock Operations May Not Be Adequate to
Pay All Costs for Required Reclamation:
Financial assurances may not be adequate to pay all costs for required
reclamation for 12 of the other 23 operations--11 for operations where
financial assurances were equal to the associated cost estimates and 1
where the financial assurance was greater than associated cost
estimate.[Footnote 36] The financial assurances may not be adequate
because the cost estimates on which they were based were prepared
before operations ceased--in some cases, as long as a decade ago--and
likely do not reflect inflation or other factors that would cause
reclamation costs to increase. Table 10 shows the value of the cost
estimate prepared before the operations ceased and the number of months
elapsed between that time and July 2004, when our surveys were
completed.
Table 10: Value of Cost Estimate Prepared before Hardrock Operations
Ceased and the Number of Months Elapsed between Estimate Date and July
2004 for 12 Hardrock Operations Where Financial Assurances Were Equal
to or Greater than Cost Estimate:
Operation: Pan Project;
Value of cost estimate prepared before hardrock operations ceased:
$5,670;
Date of cost estimate: Feb. 1993;
Number of months elapsed between cost estimate and July 2004: 137.
Operation: Monte Exploration;
Value of cost estimate prepared before hardrock operations ceased:
$7,395;
Date of cost estimate: April 1993;
Number of months elapsed between cost estimate and July 2004: 135.
Operation: Ward Mine;
Value of cost estimate prepared before hardrock operations ceased:
$141,500;
Date of cost estimate: Mar. 1993;
Number of months elapsed between cost estimate and July 2004: 136.
Operation: Northern Crown Mines;
Value of cost estimate prepared before hardrock operations ceased:
$3,897;
Date of cost estimate: Dec. 1991;
Number of months elapsed between cost estimate and July 2004: 151.
Operation: Phil Claims Expl Proj;
Value of cost estimate prepared before hardrock operations ceased:
$28,556;
Date of cost estimate: Oct. 1995;
Number of months elapsed between cost estimate and July 2004: 105.
Operation: Diamond Peak Prospect Mtn;
Value of cost estimate prepared before hardrock operations ceased:
$6,500;
Date of cost estimate: May 2001;
Number of months elapsed between cost estimate and July 2004: 38.
Operation: Eldorado Pediment;
Value of cost estimate prepared before hardrock operations ceased:
$8,200;
Date of cost estimate: Oct. 2001;
Number of months elapsed between cost estimate and July 2004: 33.
Operation: Elder Creek;
Value of cost estimate prepared before hardrock operations ceased:
$256,062;
Date of cost estimate: Feb. 1996;
Number of months elapsed between cost estimate and July 2004: 101.
Operation: Gold Bar Resource Area;
Value of cost estimate prepared before hardrock operations ceased:
$303,300;
Date of cost estimate: Dec. 1994;
Number of months elapsed between cost estimate and July 2004: 115.
Operation: Gold Bar Mine;
Value of cost estimate prepared before hardrock operations ceased:
$2,608,000;
Date of cost estimate: Oct. 1994;
Number of months elapsed between cost estimate and July 2004: 117.
Operation: Atlas Exploration[A];
Value of cost estimate prepared before hardrock operations ceased:
$265,000[A];
Date of cost estimate: June 1994;
Number of months elapsed between cost estimate and July 2004: 121.
Operation: Snowbound Placer;
Value of cost estimate prepared before hardrock operations ceased:
$2,970;
Date of cost estimate: June 2003;
Number of months elapsed between cost estimate and July 2004: 13.
Source: GAO analysis of BLM survey responses.
[A] The value of the financial assurance for this operation was $2,000
more than the value of the cost estimate.
[End of table]
Because reclamation costs can be influenced by many factors, we did not
attempt to project the amount that the cost estimates prepared before
operations ceased were likely to be less than the amount currently
needed to complete reclamation. However, BLM's past experience with
reclamation costs indicates that cost estimates prepared after
operations ceased likely will be higher than cost estimates prepared
before operations ceased. Specifically, BLM updated cost estimates for
16 of the 43 operations for which cost estimates had been prepared
before operations ceased, and those updated estimates were the same for
2, lower for 2, and higher for 12 operations. The increases in BLM's 12
higher estimates totaled about $35.5 million, or about a 47 percent
increase over the estimates before operations ceased, and ranged from
$690 to $16.7 million per hardrock operation, while the decreases in
BLM's 2 lower estimates totaled $10,497, or about a 33 percent
decrease, and were $6,000 and $4,497 for the two hardrock operations.
Federal Agencies and Others Provided Only a Fraction of the Funds
Needed to Pay Estimated Costs for Required Reclamation:
As of July 2004, BLM reported that federal agencies and others had
provided about $10.6 million to help reclaim 11 operations. These funds
accounted for about 8 percent of the estimated $136 million needed to
pay for required reclamation for operations identified by BLM as ceased
and not reclaimed by operators. The sources and amounts of funds
provided by others are shown in figure 8. Appendix III, table 19, shows
the other sources of funds for the 48 operations.
Figure 6: Sources of $10.6 Million Provided by Others to Pay the Cost
of Required Reclamation for 11 Operations Identified by BLM as Ceased
and Not Reclaimed by Operators, as of July 2004:
[See PDF for image]
[End of figure]
BLM headquarters provided over $6.7 million to reclaim 10 operations.
Nearly all of this amount--$5,594,500--was for the Zortman and Landusky
mining operation in Montana.[Footnote 37] Officials in Montana's
Lewistown field office told us that most of these funds came from BLM's
Abandoned Mine Land Program and were used to remove leach pads and
tailings, backfill pits, and treat water.[Footnote 38] BLM headquarters
officials told us that some of the funds used to reclaim the 10
operations were special funds that became available on a one-time basis
as the result of a GAO report.[Footnote 39] In March 2001, we reported
that BLM had improperly used Mining Law Administration Program funds
for purposes other than intended by that program and recommended that
BLM correct the improper charges. BLM made the corrections and,
according to BLM headquarters officials, used some of the funds for
reclamation.
The U.S. Army Corps of Engineers (the Corps) provided about $0.8
million to reclaim two operations through its Restoration of Abandoned
Mines Sites (RAMS) program, according to BLM. The RAMS program, created
in 1999, allows the Secretary of the Army to provide assistance to
federal and nonfederal entities for projects to address water quality
problems caused by drainage and related activities from inactive and
abandoned noncoal mines, such as hardrock operations. Specifically, BLM
reported that the Corps provided $171,000 to reclaim the Easy Jr Mine
located near Ely, Nevada. These funds were used for a site
characterization study and for construction to close the operation,
with the primary goal of recontouring and reclaiming a heap-leach pad.
In addition, the Corps provided $600,000 to reclaim the Golden Butte
Mine, which is also located near Ely, Nevada. This project included
collecting and analyzing water data, characterizing the leach pad, and
developing a closure plan. The Corps also partnered with BLM through
the RAMS program on another operation that had ceased and not been
reclaimed by the operator--the Elder Creek operation located near
Battle Mountain, Nevada. BLM told us that, as of July 2004, the Corps
had provided all of the funds to develop the engineering closure design
for this project, but BLM did not identify the amount of funds
provided.
Funds to reclaim the Zortman and Landusky mining operation also were
provided from other sources, according to BLM. Through a bankruptcy
procedure, the bankrupt operator provided $1,050,000 to help reclaim
the operation. The Environmental Protection Agency provided $340,000 in
grant funds, primarily to prepare a supplemental environmental impact
statement. Finally, the Montana Department of Environmental Quality
provided $1,697,000 for reclamation activities, such as studies,
sampling, tailings removal, water treatment, and monitoring.[Footnote
40] The status of reclamation in 1993 and 2004 for the Zortman and
Landusky mining operations is shown below.
Text Box:
Description of Zortman and Landusky Mine:
The Zortman and Landusky Mine is located in north-central Montana on
about 1,200 acres, half of which are on BLM land. The operation,
originally permitted in the 1970s, was the first large open-pit gold
mine to use heap leaching in the United States. BLM reported that the
operation began under a BLM-approved plan of operation in 1981 and
ceased in 1999 after Pegasus Gold, the parent company, went bankrupt.
BLM reported that, as of July 2004, over 85 percent of the required
reclamation had been done and that complete reclamation is very likely.
Source: BLM and others.
[End of text box]
Figure 7: Zortman and Landusky Mining Operations at or Near Buildout in
1993 and Status of Reclamation in 2004:
[See PDF for image]
[End of figure]
The $136 Million Estimate of Costs for Required Reclamation Is
Understated to the Extent That BLM Did Not Identify or Report on All
Hardrock Operations:
The $136 million estimate of costs for required reclamation for
hardrock operations that had ceased and not been reclaimed by the
operators as required is understated to the extent that BLM did not
identify or report information on all such operations. For example,
officials in Oregon's BLM state office estimated that 20 notice-level
operations in Washington state met these criteria, but neither the
Oregon BLM state office nor its field offices completed our surveys for
any of these operations. State office officials did not explain why
surveys had not been completed for these notice-level operations.
Clearly, the $136 million estimate would be higher if BLM's state or
field offices had reported this information. Furthermore, some other
BLM offices had difficulty identifying operations that met our criteria
and may not have identified all such operations. For example, Nevada's
BLM state office completed additional hardrock operation surveys after
we questioned whether they had identified all the operations that met
the criteria. For more detailed information on the difficulties in
identifying hardrock operations that met our criteria, see our scope
and methodology in appendix I.
Required Reclamation Has Been Completed for 5 of the 48 Hardrock
Operations, and BLM Officials Believe That Reclamation Will Likely Be
Completed for 28 Others:
BLM reported that, as of July 2004, required reclamation had been
completed for 5 of the 48 hardrock operations on BLM land that had
ceased and not been reclaimed by operators since it began requiring
financial assurances, and it expects to complete reclamation for most
of the remaining operations. BLM reported that the reclamation status
was in various stages or unknown for the 43 operations that had not
completed reclamation. BLM officials' views on the likelihood of
completing required reclamation for these operations varied, but they
believed that 28 of the 43 operations are likely to be reclaimed, as
shown in table 11. Appendix III, table 19, shows the status and
likelihood of completing reclamation for the 48 operations.
Table 11: Reclamation Status and BLM Views on the Likelihood of
Completing Reclamation of 43 Hardrock Operations for Which Required
Reclamation Had Not Been Completed by Operators, as of July 2004:
Reclamation status: Percent of reclamation completed: 96-99%;
Reclamation status: Number of hardrock operations: 4;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 4;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: No answer: 0.
Reclamation status: Percent of reclamation completed: 76–95%;
Reclamation status: Number of hardrock operations: 7;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 6;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 1;
BLM‘s views on the likelihood of completing reclamation: No answer: 0.
Reclamation status: Percent of reclamation completed: 51–75%;
Reclamation status: Number of hardrock operations: 3;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 3;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: No answer: 0.
Reclamation status: Percent of reclamation completed: 26–50%;
Reclamation status: Number of hardrock operations: 4;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 1;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 3;
BLM‘s views on the likelihood of completing reclamation: No answer: 0.
Reclamation status: Percent of reclamation completed: 1–25%;
Reclamation status: Number of hardrock operations: 8;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 5;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 3;
BLM‘s views on the likelihood of completing reclamation: No answer: 0.
Reclamation status: Percent of reclamation completed: 0%;
Reclamation status: Number of hardrock operations: 13;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 7;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 5;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 1;
BLM‘s views on the likelihood of completing reclamation: No answer: 0.
Reclamation status: Percent of reclamation completed: Do not know;
Reclamation status: Number of hardrock operations: 4;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 2;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 0;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 1;
BLM‘s views on the likelihood of completing reclamation: No answer: 1.
Reclamation status: Percent of reclamation completed: Total;
Reclamation status: Number of hardrock operations: 43;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very likely: 28;
BLM‘s views on the likelihood of completing reclamation: About as
likely as unlikely: 5;
BLM‘s views on the likelihood of completing reclamation: Somewhat or
very unlikely: 9;
BLM‘s views on the likelihood of completing reclamation: No answer: 1.
Source: GAO analysis of BLM survey responses.
[End of table]
Required reclamation of the five operations that were fully completed
was accomplished with funds from several sources. For three of the five
operations, financial assurances were sufficient to cover the costs to
complete reclamation, including one for which the operator did some
reclamation and negotiated with BLM to have BLM do the remaining
reclamation. For the other two operations, BLM paid at least part of
the reclamation costs. Specifically, BLM spent $92,000 to reclaim one
operation that had no financial assurances, and spent $15,000 to
reclaim another operation whose financial assurance was less than the
most recent reclamation cost estimate. In the latter case, the operator
agreed to abandon the claim if BLM did the reclamation; the operation
was in a wild and scenic river canyon in California.
BLM officials generally believed that required reclamation would be
completed for most of the 43 operations that had not been reclaimed by
the operators as of July 2004. They reported that required reclamation
was somewhat or very likely for 28, or almost two-thirds of the 43
operations. Some BLM officials believed reclamation would be completed
because funds were available from financial assurances or other
sources. For example, BLM reported that completion was very likely for
the Zortman and Landusky mining operation in Montana, which was between
86 and 95 percent reclaimed as of July 2004, partly because funds for
earthwork were available and work was under way. At the same time, BLM
noted that more than $18 million in additional funds would be needed to
maintain water treatment at the operation in perpetuity. In other
cases, officials believed that operations may be taken over by new
operators, or reopened by the existing operators, who will ultimately
complete reclamation of the operations. For example, BLM reported that
completing reclamation of an operation in Alaska that was less than 50
percent reclaimed was very likely because another operator agreed to
reclaim the area in conjunction with taking over the operation from the
bankrupt operator. Conversely, BLM reported that completing required
reclamation was somewhat or very unlikely for nine operations, most of
which had less than 50 percent of required reclamation completed as of
July 2004. BLM said that the operators of several of these operations
could not do the required reclamation, usually because they lacked
funds.
BLM's LR2000 Is Not Reliable and Sufficient for Managing Financial
Assurances for Hardrock Operations:
BLM's LR2000 is not reliable and sufficient for managing financial
assurances to cover reclamation costs for BLM land disturbed by
hardrock operations because staff do not always update information, and
LR2000 is not currently designed to track certain critical information.
Specifically, staff have not entered information on every hardrock
operation and, for those hardrock operations included in LR2000,
information is not always current. In addition, the system does not
track some information on hardrock operations and their associated
financial assurances, which we believe is critical for effectively
managing financial assurances. This information includes the basic
status of operations, some types of allowable financial assurances, and
state-and county-held financial assurances. Given these limitations, it
is not surprising that BLM's reliance on LR2000 to manage financial
assurances is mixed. In part to compensate for LR2000 limitations, some
BLM offices use informal record-keeping systems to help manage
financial assurances. BLM has taken some steps and identified others to
improve LR2000 for managing financial assurances for hardrock
operations.
Information in LR2000 Is Not Reliable and Sufficient:
Information in LR2000 is not reliable and sufficient because staff do
not always update the information, and the system is not currently
designed to track critical information. Specifically, some hardrock
operations are not in LR2000:
* In Nevada--the state with the largest number of hardrock operations-
-LR2000 does not contain information on all hardrock operations that a
state BLM official's informal records show. When Nevada officials
queried LR2000 during our visit, the system showed 248 plan-level
operations in the state. However, according to a senior Nevada BLM
state office official who keeps informal records of the hardrock
operations, some of the operations are not in LR2000; his records
contain 300 plan-level operations. According to BLM state and field
office officials, some operations are not in the system because some
data were lost during the conversion from an earlier information system
to LR2000 in 1999. Officials in one Nevada field office told us that
they have not had time to reenter some of the lost data but plan to do
so in the future.
* Alaska--with 240 hardrock operations--does not use LR2000 to record
information on these operations. Instead, BLM state office officials
told us that they use the Alaska Land Information System (ALIS) because
LR2000 cannot be used to meet the office's other needs. That is, LR2000
cannot process the conveyance of land from the federal government to
the state of Alaska and to Native villages and corporations. In
addition, the costs and staff time associated with incorporating the
information in ALIS into LR2000 contributed to BLM's decision to
continue to use ALIS.
* In BLM's March 2004 assessment of 18 of its 157 field offices'
compliance with current hardrock regulations, 3 of the 18 offices
reported that all hardrock operations were not recorded in LR2000. For
example, one of these field offices reported that its office had only
recently received training on LR2000.
Furthermore, for some operations that are in LR2000, information is not
up to date. For example, in responding to our survey regarding the
number of existing notice-and plan-level hardrock operations with
financial assurances, the New Mexico state office explained that some
of its existing operations without financial assurances may be inactive
and should be closed in LR2000. BLM officials are to open a case in
LR2000 when a notice or plan of operation is received, and they are to
close the case in LR2000 when operations have ceased and reclamation is
complete. However, BLM state and field office officials reported that
data entry is not always timely. For example, some field office
officials told us that they do not enter data until the winter, when it
is more difficult to work in the field and they spend more time in the
office. In addition, in BLM's March 2004 assessment, 11 of the 18 field
offices reported that the results of compliance inspections were not
entered in a timely manner.[Footnote 41] These inspections are critical
to ensuring that all hardrock operations are meeting federal
requirements. The field offices explained that this problem occurred
because of other office priorities, lack of staff trained to use
LR2000, and staff workload. In addition, the BLM officials who
administer LR2000 said the quality of the data currently in LR2000
varied in part because of the varied emphasis the field offices gave to
data entry.
LR2000 also does not track some critical information on hardrock
operations and their associated financial assurances. In particular,
LR2000 does not track the following:
* The status of hardrock operations, such as whether the operation is
ongoing or has ceased and should be reclaimed. LR2000 uses the term
"open" to identify both operations that are ongoing and operations that
have ceased and should be reclaimed. It uses the term "closed" to refer
to those operations where reclamation has been completed. While field
staff should know whether an operation is ongoing or has ceased because
of first-hand knowledge or access to case files in their offices, BLM
headquarters and state office officials do not have ready access to
this basic information. For example, in response to our survey
regarding the number of ongoing hardrock operations with financial
assurances, the Arizona state office reported that only 32 of 55 plan-
level operations had financial assurances. The office also reported
that it was reviewing its case files to determine the status of the
operations without financial assurances, such as whether any of these
operations have ceased, been reclaimed, and should have been closed in
LR2000. Also, in response to our survey, the California state office
reported that LR2000 showed 639 "open" hardrock operations in the
state, but officials estimated that only 303 of these operations were
actually ongoing. Furthermore, for 9 of the 13 states with hardrock
operations, BLM state offices reported that they did not track the
status of reclamation where operators had failed to do required
reclamation using LR2000 or other means.[Footnote 42]
* Information on all types of financial assurances allowed under
federal regulations. LR2000 has data entry fields for five of the
allowed types of assurances--surety bonds, letters of credit,
certificates of deposit, cash, and treasury securities--as well as a
"personal" field. However, some of the missing types of financial
assurances, such as corporate guarantees, bond pools, and trust funds,
are being used to guarantee reclamation costs. For example, corporate
guarantees covered $204 million in reclamation costs, or 24 percent of
the total value of financial assurances that BLM reported as of July
2004. To overcome this system limitation, the Nevada BLM state office
uses the "personal" field to track information on both corporate
guarantees and operations covered by the state bond pool. Without the
capability to track all types of financial assurances, BLM cannot
identify the total amount of reclamation costs that each type of
financial assurance guarantees.
* Information on financial assurances held by the state or county
agencies. Several BLM state offices reported that some financial
assurances for hardrock operations on BLM land are held by state or
county agencies and are not included in LR2000. For example, the
Montana BLM state office contacted the Montana Department of
Environmental Quality to obtain information on the types and amounts of
financial assurances. The Idaho office reported that it relies on its
own informal records to track state-held financial assurances and
provided the information. In California, where county agencies can hold
the financial assurances for hardrock operations on BLM land, the
office reported that it does not have information on all financial
assurances held by the counties and did not contact them to provide it.
In commenting on a draft of this report, Interior stated that BLM
issued an instruction memorandum in April 2005 to provide guidance and
direction on data standards for LR2000.[Footnote 43] The instruction
memorandum states that BLM data entry staff must use a specific action
code when financial assurances are filed and instructs the staff to use
that action code when BLM receives documentation that a financial
assurance is held by another agency.
BLM Makes Limited Use of LR2000:
Given LR2000's limitations, it is not surprising that BLM's reliance on
the system to manage financial assurances is mixed. At the headquarters
level, BLM does not always rely on information in LR2000. Rather, to
obtain information needed on hardrock operations and associated
financial assurances, BLM headquarters officials must contact their
state and field offices. For example, because the information was not
in LR2000, in March 2003, BLM headquarters requested information from
its state and field offices on the number of notice-level operations
that (1) did not meet the required deadline to request an extension,
(2) requested an extension, and (3) were extended under the 2001
regulations. BLM needed this information to determine if all notice-
level operations were in compliance with current regulations.[Footnote
44]
Furthermore, BLM headquarters does not always rely on LR2000 to answer
questions on financial assurances at a national or state level from the
Congress, the public, and other interested parties. For example, BLM
headquarters could not provide information on hardrock operations and
financial assurances in response to our request for such information
and told us we would have to get this information from the state and
field offices. State offices told us that some of the critical
information, such as the status of the hardrock operation and
reclamation cost estimates needed to determine the adequacy of the
financial assurances, is in paper case files located in the field
offices. Others also have found that BLM does not systematically use
LR2000 to track information on hardrock operations. For example, in its
1999 report on hardrock mining, the National Research Council found no
systematic, easily available compilation and analysis of information
about hardrock operations on BLM land.[Footnote 45]
At the state-and field office-levels, BLM's reliance on LR2000 for
managing financial assurances for hardrock operations varies. BLM state
offices reported that in four states with hardrock operations LR2000
was relied on to little or no extent; in eight states, to a moderate or
some extent; and in one state--Nevada--to a very great extent.[Footnote
46] Of the four BLM state offices reporting little or no reliance on
LR2000, two explained that there is no BLM state office oversight of
the program; one defers program responsibility to the state agency; and
one has few hardrock operations.
The lack of reliance on LR2000 for managing financial assurances is due
in part to state office concerns about the reliability and adequacy of
information in the system. For example, as discussed earlier, some BLM
state offices do not use LR2000 because it does not contain information
on financial assurances held by state or county agencies. States' views
on the reliability and adequacy of LR2000 are shown in table 12.
Table 12: States' Views on Reliability and Adequacy of LR2000 to Manage
Financial Assurances:
Survey question: To what extent is the information in LR2000 —Reliable
for managing financial assurances? [A]
BLM state offices‘ views: Did not use LR2000 to manage financial
assurances: 2;
BLM state offices‘ views: Very unreliable/ inadequate: 2;
BLM state offices‘ views: Unreliable/Inadequate: 1;
BLM state offices‘ views: Marginal or borderline reliability/adequacy:
2;
BLM state offices‘ views: Generally reliable/adequate: 5;
BLM state offices‘ views: Very Reliable/More than adequate: 1.
Survey question: To what extent is the information in LR2000 —Adequate
to manage financial assurances? [B]
BLM state offices‘ views: Did not use LR2000 to manage financial
assurances: 2;
BLM state offices‘ views: Very unreliable/ inadequate: 2;
BLM state offices‘ views: Unreliable/Inadequate: 1;
BLM state offices‘ views: Marginal or borderline reliability/adequacy:
2;
BLM state offices‘ views: Generally reliable/adequate: 6;
BLM state offices‘ views: Very Reliable/More than adequate: [C].
Source: GAO's analysis of BLM survey responses.
[A] We asked each of the BLM state offices with hardrock operations how
reliable is the information in LR2000 for managing financial
assurances. The categories were: very unreliable, unreliable, marginal
or borderline reliability, generally reliable, very reliable, or do not
use LR2000 for this purpose. The Alaska BLM state office answered this
question for ALIS.
[B] We asked each of the BLM state offices with hardrock operations how
adequate is the information in LR2000 for managing financial
assurances. The categories were: very inadequate, inadequate, marginal
or borderline adequacy, generally adequate, more than adequate, or do
not use LR2000 for this purpose. The Alaska BLM state office answered
this question for ALIS.
[C] None of the BLM state offices chose this response.
[End of table]
Some BLM offices reported using informal record-keeping systems or
records to track information on hardrock operations and associated
financial assurances within their jurisdiction. For example:
* In Alaska, the field offices use an Alaska state agency database to
obtain information on the number of existing notice-and plan-level
hardrock operations.
* The New Mexico BLM state office has an informal database that lists
all financial assurances filed and approved to track financial
assurance information in the state.
* The Nevada BLM state office uses field offices' logs and the Nevada
state database to track information on hardrock operations.
* The Idaho BLM state office maintains informal records on state-held
financial assurances.
According to agency officials, BLM has taken some steps to improve the
information in LR2000 and is planning others. Specifically, BLM
reported the following actions:
* Developing revised data standards for LR2000, which have not been
updated since the 1990s. These standards set forth the type and format
of information that must be entered into LR2000. Officials are
considering expanding information on the status of hardrock operations
in the system to show whether operations have been abandoned and the
type of activity associated with the operation, such as mining and road
construction. In commenting on a draft of this report, Interior stated
that BLM's April 2005 instruction memorandum provided guidance on
action codes to track the length of time between submission and
approval of hardrock plans of operation.
* Planning to add an additional report to LR2000 so that BLM officials
can directly compare information on hardrock operations with their
associated financial assurances. The creation of this report was
prompted by a request from the Nevada BLM state office for this
information.
* Reengineering LR2000 to better reflect the way BLM does business so
that officials will have better management information. Officials said
that while progress has been made on this effort with some other BLM
programs, such as oil and gas, reengineering BLM's data management for
hardrock operations is planned for the future.
BLM state offices also identified some changes to LR2000 that could
help them better manage financial assurances for hardrock operations.
These changes included ensuring the codes in LR2000 match the on-the-
ground conditions of operations; changing it to better identify
critical information on financial assurances, such as those held by
state and county agencies; and enhancing its capability to notify BLM
officials when it is time to review financial assurance amounts.
According to BLM officials responsible for administering LR2000, the
system has the capacity to handle virtually any changes that the state
and field offices request. In commenting on a draft of this report,
Interior stated that BLM will continue to refine and enhance LR2000
data systems as needed to facilitate the hardrock mining program.
Conclusions:
Having adequate financial assurances to pay reclamation costs for BLM
land disturbed by hardrock operations is critical to ensuring that the
land is reclaimed if operators fail to complete reclamation as
required. Furthermore, financial assurances must be based on sound
reclamation plans and current cost estimates so that BLM can be
confident that financial assurances will fully cover reclamation costs.
For years, BLM headquarters has relied on BLM state offices that, in
turn, rely on BLM field offices and sometimes on state and county
agencies to obtain adequate financial assurances. However, while
federal regulations and BLM guidance set forth financial assurance
requirements for notice-and plan-level hardrock mining operations, BLM
does not have a process for ensuring that the regulations and guidance
are effectively implemented to ensure that adequate financial
assurances are actually in place, as required.
Moreover, BLM does not know whether all hardrock operations have
adequate financial assurances because of limitations in the types of
information collected in LR2000 and failure of staff to update
information in a timely manner. Specifically, LR2000 does not track the
status of hardrock operations, whether each existing operation that
requires a financial assurance has the assurance, and whether the
financial assurance is adequate to pay the cost of required
reclamation.
Because BLM does not have an effective management process and critical
management information, it has not ensured that some current and
previous operators have adequate financial assurances, as required by
federal regulations and/or BLM guidance. Furthermore, some operations
either do not have any, or have outdated reclamation plans and/or cost
estimates. When operators without any financial assurances, or with
inadequate financial assurances, fail to reclaim BLM land disturbed by
their hardrock operations, BLM is left with public land that requires
tens of millions of dollars to reclaim and poses risks to the
environment and public health and safety. Until BLM establishes
monitoring and accountability mechanisms to ensure that all operations
have required financial assurances--based on sound reclamation plans
and current cost estimate--and improves the information it collects to
effectively manage financial assurances, these problems will continue.
Recommendations for Executive Action:
To ensure that hardrock operations on BLM land have adequate financial
assurances, we recommend that the Secretary of the Interior direct the
Director of BLM to take the following two actions:
* require the BLM state office directors to establish an action plan
for ensuring that operators of hardrock operations have required
financial assurances and that the financial assurances are based on
sound reclamation plans and current cost estimates, so that they are
adequate to pay all of the estimated costs of required reclamation if
operators fail to complete the reclamation, and:
* modify LR2000 to ensure that it tracks critical information on
hardrock operations and associated financial assurances so that BLM
headquarters and state offices can effectively manage financial
assurances nationwide to ensure regulatory requirements are met.
Agency Comments and Our Evaluation:
We received written comments on a draft of this report from the
Department of the Interior. Interior stated that it appreciated the
advice and critical assessment we provided on BLM's management of
financial assurances required for hardrock operations. However,
Interior did not acknowledge or address specific deficiencies
identified in our report and did not concur with our recommendations or
the conclusions upon which the recommendations were based.
In commenting on our recommendation to establish an action plan for
ensuring that operators of hardrock operations have required financial
assurances, Interior stated that existing procedures and policies
ensure financial guarantees are in place to protect the public should
an operator fail to reclaim. We disagree and believe that Interior's
view is inconsistent with the evidence we developed based on
information provided by BLM's own offices. While we agree that existing
federal regulations and BLM guidance require financial assurances to
cover all reclamation costs for notice-and plan-level hardrock
operations, the evidence in our report shows that notices and plans of
operation do not always have adequate financial assurances, as
required. As we stated in this report, BLM state offices with existing
hardrock operations informed us that, as of July 2004, some notice-
and/or plan-level operations did not have adequate financial
assurances. Furthermore, the evidence is clear that hardrock operations
have ceased without operators having the adequate financial assurances
required by regulations and BLM guidance. As a result, funds are not
available to pay at least $56.4 million in reclamation costs for
operations that had ceased and not been reclaimed since BLM began
requiring financial assurances. We continue to believe that this
evidence clearly calls for a plan of action that includes monitoring
and accountability mechanisms to ensure that the requirements in the
federal regulations and BLM guidance to have adequate financial
assurances are met.
In commenting on our recommendation to modify LR2000 to ensure that it
tracks critical information on hardrock operations and associated
financial assurances, Interior stated that BLM does track all critical
information on authorized operations in LR2000. Again, we disagree with
BLM's opinion and find this view troubling when viewed in the context
of clear evidence to the contrary presented in this report. As we
reported, LR2000 does not track the critical information needed to
effectively manage and oversee financial assurances, including the
operation's basic status, such as whether the operation is ongoing or
has ceased and should be reclaimed; some types of financial assurances
being used, such as corporate guarantees, bond pools, and trust funds;
and the adequacy of financial assurances to pay the cost of required
reclamation. We are encouraged by BLM's April 2005 instruction
memorandum to provide guidance and direction on data standards for
LR2000 and the recent addition of codes and edits to LR2000 for plans
of operations and financial guarantees, and we have added information
to our report, as appropriate. We are also encouraged by BLM's
willingness to refine and enhance LR2000. However, we continue to
believe that until BLM timely enters, tracks, and uses this critical
information it will not be able to effectively manage financial
assurances to ensure that federal regulations and BLM guidance are
followed.
Interior also suggested some technical changes that we have
incorporated as appropriate. Interior's letter is included in appendix
IV, along with our comments.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. We will then send copies to other appropriate
congressional committees and to the Secretary of the Interior. We will
also make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff have any questions concerning this report, please
contact me at (202) 512-3841 or [Hyperlink, Nazzaror@gao.gov]. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix V.
Sincerely yours,
Signed by:
Robin M. Nazzaro:
Director, Natural Resources and Environment:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
This appendix details the methods we used to examine three aspects of
financial assurances used to cover reclamation costs for the Department
of the Interior's Bureau of Land Management (BLM) land disturbed by
hardrock exploration, mining, and processing operations. Specifically,
we were asked to determine the (1) types, amount, and coverage of
financial assurances operators currently use to guarantee reclamation
costs; (2) amount that financial assurance providers and others have
paid to reclaim operations that had ceased and not been reclaimed since
BLM began requiring financial assurances and the estimated costs of
completing reclamation for such operations; and (3) reliability and
sufficiency of BLM's automated LR2000 information system for managing
financial assurances for hardrock operations.
To address these objectives, we designed two surveys to obtain
information from BLM's state and field offices because they maintain
the case files and other specific information on hardrock operations.
We asked the 12 BLM state offices that manage BLM programs across the
United States to complete surveys for each state in their jurisdiction
with hardrock operations. The 12 BLM state offices were Alaska,
Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada,
Oregon, Utah, Wyoming, and Eastern States.[Footnote 47]
We used the first survey, which focused on states' experiences with
hardrock operations, to determine the types and amounts of financial
assurances currently used to guarantee reclamation costs. Specifically,
we asked the 12 BLM state offices to provide information on (1) the
number of existing hardrock operations for each state within their
jurisdiction, (2) the types and the amounts of financial assurances
provided for existing hardrock operations in each state, (3) their
views on the effectiveness of the various types of financial
assurances, (4) their views on the reliability and sufficiency of
hardrock operation data contained in the LR2000, and (5) their use of
LR2000 for managing hardrock operations in their states.
We used the second survey, which focused on selected hardrock
operations, to determine the amount of funds provided by financial
assurances and others to reclaim hardrock operations that had ceased
and not been reclaimed by operators since BLM began requiring financial
assurances and the estimated costs of completing reclamation of such
operations. We asked the state offices to provide detailed information
on each hardrock operation within their jurisdiction that met both of
the following criteria: the operator (1) ceased operations after the
requirement for financial assurances went into effect--August 1990 for
plan-level operations, January 2001 for new notice-level operations,
and January 2003 for existing notice-level operations--and (2) failed
to complete the required reclamation. In most cases, BLM field office
staff completed this survey because hardrock operation case files are
maintained in these offices. Also, as necessary, we obtained
information from BLM state and field staff to clarify responses to the
survey. We used the information obtained to determine the estimated
reclamation costs and the adequacy of financial assurances for
reclaiming the hardrock operations that BLM identified as meeting our
criteria.
To determine the adequacy of financial assurances, we compared the most
recent complete reclamation cost estimate that BLM reported for each
operation with the dollar value of the financial assurance that BLM
reported for that operation. We then computed the difference between
the most recent cost estimate and the value of the financial assurance
to determine the total net excess or deficiency of the financial
assurances. The total is the sum of the differences between the values
of the financial assurances and the cost estimates that were made at
different times over the past 15 years and were not adjusted for
inflation. For each operation, we asked BLM to report the value of the
(1) estimates that the operator had before operations ceased, (2)
estimates that BLM prepared after operations ceased, (3) actual
reclamation costs, (4) BLM's estimate of the shortfall in funds needed
to complete reclamation in excess of funds relinquished by the
financial assurance provider, and (5) BLM's estimates of funds needed
to complete required reclamation. BLM reported one or more of these
values for 43 operations, and no value for the other 5 operations. For
24 of these 43 operations, BLM reported only one value, and we used
that value as the most recent reclamation cost estimate. For the other
19 operations, BLM reported two or more values. In determining which
value to use for our analysis, we generally did not use the (1) actual
costs for operations that were not fully reclaimed because the actual
cost could not be known unless reclamation was complete and (2)
estimated funds needed to complete reclamation for operations that were
partly reclaimed because those estimates did not include funds that had
already been spent. We used the following values as the most recent
reclamation cost estimate for these 19 operations.
* For 12 operations, we used BLM's estimate prepared after operations
ceased because those estimates were the most recent.
* For three operations that BLM reported as having no reclamation
completed or not knowing the status of reclamation, we used BLM's
reported estimate of funds needed to complete required reclamation.
* For one operation that BLM reported as being fully reclaimed, we used
BLM's reported actual cost.
* For one operation, we used BLM's estimate of the shortfall of funds
needed in excess of funds relinquished by the financial assurance
provider because that estimate was the most recent and most accurate,
according to BLM officials.
* For one operation, we used the estimate available before operations
ceased because the only other value reported for the operation was
BLM's estimate of funds needed to complete reclamation and reclamation
was only partly completed.
* For one operation, we used the estimate available before operations
ceased because the other values reported for the operation were BLM's
estimate of funds needed to complete reclamation and the reported
amount of actual costs, but reclamation was only partly completed.
We provided a copy of these two surveys to BLM headquarters and
incorporated officials' comments as appropriate. We also pretested
these surveys with state and field office staff in Nevada, Utah, and
Arizona and made changes in the surveys' scope and content as
appropriate. Further, after respondents submitted their answers, we (1)
verified the information in the survey that focused on states' hardrock
operations experience through discussions with BLM officials in two
state offices with extensive financial assurance experience in hardrock
operations--Nevada and Montana--and (2) verified information reported
in four randomly selected hardrock operations surveys through
discussions with officials and a review of case files in three Nevada
field offices--Carson City, Elko, and Winnemucca--and one Montana field
office--Lewistown. We checked the answers respondents had given to the
questions against information contained in the case files. In many
cases, staff provided answers based on their own knowledge and
information in the case files.
Some BLM state offices had difficulty identifying hardrock operations
that met our criteria. For example, some states completed our surveys
for hardrock operations that did not appear to meet our criteria, and
we contacted the respondents to clarify whether the operations did or
did not meet the criteria. We eliminated 12 surveys that did not meet
the criteria from our analysis.
Furthermore, we cannot know whether BLM reported to us all hardrock
operations that met our criteria. To address this concern, we took
additional steps to help ensure that BLM completed the selected
hardrock operations survey for all operations that met our criteria.
For example, in Nevada, we compared a list of bankrupt operations
prepared by the Nevada Bonding Task Force with a list of BLM's
completed surveys to identify potential omissions. In addition, we
asked selected experts, interest groups, and others to identify
instances when operators failed to complete required reclamation and
the federal government or others paid such reclamation costs or the
required reclamation was not fully completed. To the extent that BLM
staff did not identify all of the operations that met our criteria or
did not report information on those operations that did meet the
criteria, the information the BLM staff reported is incomplete.
Furthermore, we did not collect information on the thousands of ceased
hardrock operations since 1872 that did not require financial
assurances and, therefore, fell outside the scope of this review.
To determine the reliability and sufficiency of BLM's LR2000 system, we
spoke with BLM information technology officials in the headquarters
unit near Denver, Colorado, who are responsible for administering the
system; BLM state and field office staff in two states who enter
information into the system; and BLM managers at headquarters and in
two states who use information from the system. In addition, we visited
information technology officials near Denver to discuss the structure
and history of LR2000 and to observe firsthand how data are entered
into and processed by the two subsystems used to manage financial
assurances--the Case Recordation System, which contains information
about hardrock operations, and the Bond and Surety System, which
contains information about financial assurances. Also, in our two
surveys of BLM's 12 state offices, we asked questions to gather data on
whether each respondent used LR2000 to respond to the survey.
Specifically, we asked questions about whether the information used to
respond came from LR2000 or from state office personnel's knowledge,
field office personnel's knowledge, other databases, case files, or
other sources. These questions helped us determine the extent to which
BLM officials used and relied on the data in LR2000.
It is important to note that the practical difficulties of conducting
any survey introduce various types of errors. Differences in how a
particular question is interpreted and differences in the sources of
information available to respondents can also be sources of survey
response errors. We included steps in both the data collection and data
analysis stages to minimize such errors. These steps included
developing our survey questions with the aid of our survey specialists,
conducting pretests of the questionnaires, and twice verifying the
entry of survey data where applicable.
In addition to the surveys, we took several steps to understand BLM's
management and oversight of hardrock operations and the use of
financial assurances to ensure reclamation. We reviewed GAO reports,
federal laws and regulations, BLM documents, and independent studies on
hardrock operations and financial assurances. We also discussed these
issues with BLM officials at headquarters and in selected state and
field offices in Arizona, Montana, Nevada, and Utah. To understand the
relationship between BLM and state agencies responsible for overseeing
hardrock operations, we met with BLM and state agency officials in
Colorado and Nevada, and we reviewed relevant memorandums of
understanding and other documents for these and other states. We also
discussed relevant hardrock operation and financial assurance issues
with experts and representatives from the mining industry, academia,
and environmental groups. Finally, to better understand hardrock
operations and reclamation requirements, we visited five hardrock
operations on BLM land in two states--the Florida Canyon, MacArthur
Mine, Olinghouse, and Relief Canyon operations in Nevada and the
Zortman and Landusky operation in Montana.
We conducted our review from October 2003 through May 2005 in
accordance with generally accepted government auditing standards,
including an assessment of data reliability.
[End of section]
Appendix II: Number of Notice-and Plan-Level Hardrock Operations and
Value of Associated Financial Assurances:
This appendix provides information on the number of notice-and plan-
level operations and dollar value of associated financial assurances
for the 12 states with existing hardrock operations as of July 2004, as
reported by BLM.
Table 13: Number of Notice-and Plan-Level Hardrock Operations and
Associated Financial Assurances, by State, as of July 2004:
State: Alaska;
Notice-level operations: Number of operations: 134;
Notice-level operations: Value of financial assurances: [A];
Plan-level operations: Number of operations: 106;
Plan-level operations: Value of financial assurances: [A];
Total for notice- and plan-level hardrock operations: Number of
operations: 240;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $1,000,000.
State: Arizona;
Notice-level operations: Number of operations: 130;
Notice-level operations: Value of financial assurances: $446,107;
Plan-level operations: Number of operations: 55;
Plan-level operations: Value of financial assurances: $4,326,891;
Total for notice- and plan-level hardrock operations: Number of
operations: 185;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $4,772,998.
State: California[B];
Notice-level operations: Number of operations: 205;
Notice-level operations: Value of financial assurances: $116,800;
Plan-level operations: Number of operations: 98;
Plan-level operations: Value of financial assurances: $4,819,000;
Total for notice- and plan-level hardrock operations: Number of
operations: 303;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $4,935,800.
State: Colorado;
Notice-level operations: Number of operations: 102;
Notice-level operations: Value of financial assurances: $14,600;
Plan-level operations: Number of operations: 30;
Plan-level operations: Value of financial assurances: $1,722,313;
Total for notice- and plan-level hardrock operations: Number of
operations: 132;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $1,736,913.
State: Idaho[C];
Notice-level operations: Number of operations: 32;
Notice-level operations: Value of financial assurances: $43,761;
Plan-level operations: Number of operations: 23;
Plan-level operations: Value of financial assurances: $751,771;
Total for notice- and plan-level hardrock operations: Number of
operations: 55;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $795,532.
State: Montana;
Notice-level operations: Number of operations: 150;
Notice-level operations: Value of financial assurances: [D];
Plan-level operations: Number of operations: 30;
Plan-level operations: Value of financial assurances: [D];
Total for notice- and plan-level hardrock operations: Number of
operations: 180;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $109,307,930.
State: New Mexico;
Notice-level operations: Number of operations: 24;
Notice-level operations: Value of financial assurances: [E];
Plan-level operations: Number of operations: 11;
Plan-level operations: Value of financial assurances: [E];
Total for notice- and plan-level hardrock operations: Number of
operations: 35;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $4,298,989.
State: Nevada[F];
Notice-level operations: Number of operations: 450;
Notice-level operations: Value of financial assurances: $7,001,785;
Plan-level operations: Number of operations: 324;
Plan-level operations: Value of financial assurances: $621,495,665;
Total for notice- and plan-level hardrock operations: Number of
operations: 774;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $629,684,465.
State: Oregon;
Notice-level operations: Number of operations: 165;
Notice-level operations: Value of financial assurances: $21,000;
Plan-level operations: Number of operations: 10;
Plan-level operations: Value of financial assurances: $31,000;
Total for notice- and plan-level hardrock operations: Number of
operations: 175;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $52,000.
State: Utah[G];
Notice-level operations: Number of operations: 167;
Notice-level operations: Value of financial assurances: $552,556;
Plan-level operations: Number of operations: 49;
Plan-level operations: Value of financial assurances: $2,175,629;
Total for notice- and plan-level hardrock operations: Number of
operations: 216;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $2,728,185.
State: Washington;
Notice-level operations: Number of operations: 127;
Notice-level operations: Value of financial assurances: [H];
Plan-level operations: Number of operations: 12;
Plan-level operations: Value of financial assurances: [H];
Total for notice- and plan-level hardrock operations: Number of
operations: 139;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: [H].
State: Wyoming[I];
Notice-level operations: Number of operations: 18;
Notice-level operations: Value of financial assurances: $51,000;
Plan-level operations: Number of operations: 38;
Plan-level operations: Value of financial assurances: $77,357,524;
Total for notice- and plan-level hardrock operations: Number of
operations: 56;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $77,408,524.
Total;
Notice-level operations: Number of operations: 1,704;
Notice-level operations: Value of financial assurances: [J];
Plan-level operations: Number of operations: 786;
Plan-level operations: Value of financial assurances: [J];
Total for notice- and plan-level hardrock operations: Number of
operations: 2490;
Total for notice- and plan-level hardrock operations: Value of
financial assurances: $836,721,336.
Source: GAO analysis of BLM data.
[A] The Alaska state bond pool covers all hardrock operations in the
state. The Alaska BLM office did not provide information on the value
of financial assurances for each type of operation.
[B] The $4,935,800 in financial assurances includes those held by BLM,
the state of California, and some county agencies in California.
However, it may not include all financial assurances held by California
counties to guarantee reclamation of hardrock operations on BLM public
land.
[C] The $795,532 in financial assurances includes $512,590 held by the
state of Idaho and $282,942 held by the BLM.
[D] Montana BLM holds $66,390 in financial assurances for hardrock
operations in the state. The majority of financial assurances funds,
$109,241,540, are held by the Montana Department of Environmental
Quality. Neither the BLM nor the state agency provided information on
the value of the financial assurances by type of operation.
[E] New Mexico BLM holds $975,191 in financial assurances--$71,898 for
notice-level operations and $903,293 for plan-level operations.
Additional financial assurances held by the New Mexico Mining and
Minerals Division for hardrock operations on BLM land total $3,323,798.
The New Mexico agency did not provide information on the value of these
financial assurances by type of operation.
[F] The Nevada BLM reported that some operators in the state use
statewide and nationwide financial assurances that the office could not
separate by notice-and plan-level operation. The office estimated that
10 percent of the statewide and nationwide financial assurances cover
notice-level and 90 percent cover plan-level operations and allocated
assurances accordingly. The $629,684,465 in financial assurances
includes corporate guarantees held by the state of Nevada and one trust
fund and the state bond pool, which are maintained by the State of
Nevada.
[G] The $2,728,185 in financial assurances for Utah includes those held
by both the BLM and the state of Utah.
[H] The Oregon BLM state office did not provide information on the
amount of financial assurances available to reclaim the 139 existing
hardrock operations it identified in the state of Washington on BLM
public land. The office reported no individual bonds are used for
operations in Washington state, but that a statewide bond is held by
the Washington Department of Ecology.
[I] The state of Wyoming holds all financial assurances to guarantee
reclamation of BLM public land.
[J] The total value of financial assurances for notice-level operations
or the total value for plan-level operations is not available because
BLM did not provide this information for some states.
[End of table]
[End of section]
Appendix III: Detailed Information on 48 Hardrock Operations That Had
Ceased and Not Been Reclaimed by Operators:
This appendix provides detailed information obtained from our survey on
the 48 hardrock operations that BLM identified as ceased but not
reclaimed by the operator since BLM began requiring financial
assurances. Specifically, the appendix presents tables 14 through 19
showing: the basic characteristics of the 48 hardrock operations; key
reclamation dates; BLM steps to compel operators to reclaim BLM land
disturbed by hardrock operations and reasons operators did not reclaim
the land; estimated reclamation costs; the types and amount of
financial assurances and the amount of financial assurances
relinquished and spent on reclamation; and sources of other funds and
the status of reclamation.
Table 14: Basic Characteristics of 48 Hardrock Operations That Had
Ceased and Not Been Reclaimed by Operators:
State and operation: Alaska: Chapman Creek Mining;
Authority: Plan;
Type of operation: Mining; other (road construction);
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 5.
State and operation: Alaska: R D Environmental Mining;
Authority: Plan;
Type of operation: Exploration; mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 2.
State and operation: Alaska: Gold Hill Mining;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 30.
State and operation: Alaska: Nixon Fork Mine;
Authority: Plan;
Type of operation: Exploration; mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 115.
State and operation: Arizona: Tyro Mill;
Authority: Plan;
Type of operation: Other (gold milling);
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 20.
State and operation: Arizona: Granite Property;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: [A].
State and operation: Arizona: Herring Mine;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 2.
State and operation: Arizona: SKOR;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 3.
State and operation: Arizona: UFO;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 12.
State and operation: Arizona: Ironwood Claim Group;
Authority: New notice;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: [A].
State and operation: California: Screech Owl;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 2.
State and operation: California: Nina;
Authority: Plan;
Type of operation: Mining; other (placer gold wash plant);
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 4.
State and operation: Idaho: West One Minerals;
Authority: Plan;
Type of operation: Exploration; mining;
Primary hardrock mineral: Limestone;
Heap-leaching: No;
BLM acres: 7.
State and operation: Montana: Snowbound Placer;
Authority: New notice;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 0.
State and operation: Montana: Zortman & Landusky Mine;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 684.
State and operation: Montana: Zortman Exploration Plans;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 88.
State and operation: Nevada: Adelaide Crown;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 69.
State and operation: Nevada: Wildhorse Canyon;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 12.
State and operation: Nevada: South Hy/Isabella;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 22.
State and operation: Nevada: Hogum or Golden Eagle;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 10.
State and operation: Nevada: Golden Butte;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 235.
State and operation: Nevada: Pan Project;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 30.
State and operation: Nevada: Monte Exploration;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 18.
State and operation: Nevada: Ward Mine;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Zinc;
Heap-leaching: No;
BLM acres: 22.
State and operation: Nevada: Easy Jr;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 247.
State and operation: Nevada: MacArthur Mine;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Copper;
Heap-leaching: Yes;
BLM acres: 415.
State and operation: Nevada: Northern Crown Mines;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 4.
State and operation: Nevada: Maverick Springs;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 13.
State and operation: Nevada: Phil Claims Expl Proj;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 23.
State and operation: Nevada: Kinsley;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 350.
State and operation: Nevada: County Line Project;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 130.
State and operation: Nevada: Olinghouse Mine;
Authority: Plan;
Type of operation: Exploration; mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 447.
State and operation: Nevada: Mina Mill;
Authority: Plan;
Type of operation: Other (custom mill);
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 20.
State and operation: Nevada: Diamond Peak Prospect Mtn;
Authority: New Notice;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 1.
State and operation: Nevada: Eldorado Pediment;
Authority: New Notice;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 1.
State and operation: Nevada: Phoenix Metals USA II Inc;
Authority: Plan;
Type of operation: Other (mill site);
Primary hardrock mineral: Platinum group metals/gold;
Heap-leaching: No;
BLM acres: 12.
State and operation: Nevada: American Canyon KOF;
Authority: New Notice;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 1.
State and operation: Nevada: Jumbo Mine;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 63.
State and operation: Nevada: Relief Canyon Mine;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 295.
State and operation: Nevada: Elder Creek;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 102.
State and operation: Nevada: Gold Bar Resource Area;
Authority: Plan;
Type of operation: Exploration; mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 154.
State and operation: Nevada: Atlas Exploration;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 149.
State and operation: Nevada: 16: 1 Millsite;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Silver;
Heap-leaching: Yes;
BLM acres: 40.
State and operation: Nevada: Gold Bar Mine;
Authority: Plan;
Type of operation: Exploration; mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 1,175.
State and operation: Nevada: Paradise Peak;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: Yes;
BLM acres: 470.
State and operation: Washington: Raven Hill Mining;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Rare Earth Elements;
Heap-leaching: No;
BLM acres: 10.
State and operation: Washington: Empire Creek Project;
Authority: Plan;
Type of operation: Exploration;
Primary hardrock mineral: Unknown;
Heap-leaching: No;
BLM acres: 5.
State and operation: Washington: Lamefoot;
Authority: Plan;
Type of operation: Mining;
Primary hardrock mineral: Gold;
Heap-leaching: No;
BLM acres: 5.
Source: BLM survey responses.
[A] No acreage given.
[End of table]
Table 15: Key Dates for 48 Hardrock Operations That Had Ceased and Not
Been Reclaimed by Operators:
State: Alaska:
Chapman Creek Mining;
Operation began: 7/1996;
Last plan of operation update: 7/1996;
Last reclamation plan update: Not applicable;
Last cost estimate update: No answer;
Operation ceased: 1/1998;
BLM cost estimate: No answer.
R D Environmental Mining;
Operation began: 1/1992;
Last plan of operation update: 7/1995;
Last reclamation plan update: 7/1995;
Last cost estimate update: No answer;
Operation ceased: 1/1995;
BLM cost estimate: 6/2003.
Gold Hill Mining;
Operation began: 2/1999;
Last plan of operation update: 5/2000;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 5/2002;
BLM cost estimate: No answer.
Nixon Fork Mine;
Operation began: 1/1991;
Last plan of operation update: 5/1999;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 1/1999;
BLM cost estimate: No answer.
State: Arizona:
Tyro Mill;
Operation began: 1/1980;
Last plan of operation update: 2/2000;
Last reclamation plan update: 2/2000;
Last cost estimate update: 2/2000;
Operation ceased: 7/2002;
BLM cost estimate: No answer.
Granite Property;
Operation began: 1/1990;
Last plan of operation update: 5/1990;
Last reclamation plan update: 5/1990;
Last cost estimate update: No answer;
Operation ceased: 11/1990;
BLM cost estimate: No answer.
Herring Mine;
Operation began: 1/2002;
Last plan of operation update: 6/2002;
Last reclamation plan update: 6/2002;
Last cost estimate update: 6/2002;
Operation ceased: 1/2002;
BLM cost estimate: No answer.
SKOR;
Operation began: 1/1984;
Last plan of operation update: 3/1985;
Last reclamation plan update: Not applicable;
Last cost estimate update: No answer;
Operation ceased: 1/1991;
BLM cost estimate: 6/2003.
UFO;
Operation began: 1/1982;
Last plan of operation update: 5/1991;
Last reclamation plan update: Not applicable;
Last cost estimate update: No answer;
Operation ceased: 1/1991;
BLM cost estimate: 3/2004.
Ironwood Claim Group;
Operation began: 1/1983;
Last plan of operation update: 1/2003;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 1/2003;
BLM cost estimate: No answer.
State: California:
Screech Owl;
Operation began: 7/1981;
Last plan of operation update: 8/1995;
Last reclamation plan update: 8/1995;
Last cost estimate update: No answer;
Operation ceased: 8/1996;
BLM cost estimate: No answer.
Nina;
Operation began: 1/1988;
Last plan of operation update: 5/1995;
Last reclamation plan update: 4/1988;
Last cost estimate update: 4/1988;
Operation ceased: 1/2001;
BLM cost estimate: 9/2003.
State: Idaho:
West One Minerals;
Operation began: 3/1990;
Last plan of operation update: 1/1991;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 4/1991;
BLM cost estimate: No answer.
State: Montana:
Snowbound Placer;
Operation began: 1/2003;
Last plan of operation update: 6/2003;
Last reclamation plan update: 9/2003;
Last cost estimate update: 6/2003;
Operation ceased: 1/2003;
BLM cost estimate: No answer.
Zortman & Landusky Mine;
Operation began: 1/1981;
Last plan of operation update: 2/1994;
Last reclamation plan update: 2/1994;
Last cost estimate update: 6/1998;
Operation ceased: 1/1999;
BLM cost estimate: 8/2004.
Zortman Exploration Plans;
Operation began: 1/1981;
Last plan of operation update: 1/1996;
Last reclamation plan update: 1/1996;
Last cost estimate update: 8/1999;
Operation ceased: 1/1998;
BLM cost estimate: 8/1999.
State: Nevada:
Adelaide Crown;
Operation began: 6/1988;
Last plan of operation update: 6/1991;
Last reclamation plan update: 3/1988;
Last cost estimate update: No answer;
Operation ceased: 10/1991;
BLM cost estimate: No answer.
Wildhorse Canyon;
Operation began: 10/1989;
Last plan of operation update: 3/1995;
Last reclamation plan update: 3/1995;
Last cost estimate update: 3/1995;
Operation ceased: 7/1999;
BLM cost estimate: 6/2003.
South Hy/Isabella;
Operation began: 5/1988;
Last plan of operation update: 5/1995;
Last reclamation plan update: 5/1995;
Last cost estimate update: 5/1995;
Operation ceased: 7/1999;
BLM cost estimate: 6/2003.
Hogum or Golden Eagle;
Operation began: 1/1997;
Last plan of operation update: 2/1989;
Last reclamation plan update: 2/1989;
Last cost estimate update: No answer;
Operation ceased: 1/1999;
BLM cost estimate: No answer.
Golden Butte;
Operation began: 1/1986;
Last plan of operation update: 9/1995;
Last reclamation plan update: 4/1993;
Last cost estimate update: 4/1993;
Operation ceased: 1/1999;
BLM cost estimate: 8/2004.
Pan Project;
Operation began: 1/1989;
Last plan of operation update: 9/1989;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 1/1999;
BLM cost estimate: No answer.
Monte Exploration;
Operation began: 1/1987;
Last plan of operation update: 4/1993;
Last reclamation plan update: 4/1993;
Last cost estimate update: 4/1993;
Operation ceased: 1/1999;
BLM cost estimate: No answer.
Ward Mine;
Operation began: 1/1989;
Last plan of operation update: 3/1993;
Last reclamation plan update: 11/1994;
Last cost estimate update: No answer;
Operation ceased: 1/1999;
BLM cost estimate: No answer.
Easy Jr;
Operation began: 1/1987;
Last plan of operation update: 5/1999;
Last reclamation plan update: 5/1999;
Last cost estimate update: 5/1999;
Operation ceased: 1/1999;
BLM cost estimate: 8/2003.
MacArthur Mine;
Operation began: 9/1992;
Last plan of operation update: 9/1995;
Last reclamation plan update: 5/1998;
Last cost estimate update: No answer;
Operation ceased: 11/1997;
BLM cost estimate: No answer.
Northern Crown Mines;
Operation began: 12/1991;
Last plan of operation update: 3/1993;
Last reclamation plan update: Not applicable;
Last cost estimate update: 12/1991;
Operation ceased: 12/1993;
BLM cost estimate: No answer.
Maverick Springs;
Operation began: 7/1990;
Last plan of operation update: 12/1990;
Last reclamation plan update: Not applicable;
Last cost estimate update: No answer;
Operation ceased: 7/1991;
BLM cost estimate: 9/1993.
Phil Claims Expl Proj;
Operation began: 1/1982;
Last plan of operation update: 10/1995;
Last reclamation plan update: 10/1995;
Last cost estimate update: 10/1995;
Operation ceased: 1/1998;
BLM cost estimate: No answer.
Kinsley;
Operation began: 1/1994;
Last plan of operation update: 3/1997;
Last reclamation plan update: 1/1996;
Last cost estimate update: 1/1996;
Operation ceased: 1/2000;
BLM cost estimate: No answer.
County Line Project;
Operation began: 5/1991;
Last plan of operation update: 1/1992;
Last reclamation plan update: 12/1994;
Last cost estimate update: 1/1992;
Operation ceased: 12/1995;
BLM cost estimate: No answer.
Olinghouse Mine;
Operation began: 5/1998;
Last plan of operation update: 9/2002;
Last reclamation plan update: 9/2002;
Last cost estimate update: 9/2002;
Operation ceased: 5/1999;
BLM cost estimate: No answer.
Mina Mill;
Operation began: 11/1985;
Last plan of operation update: 11/1994;
Last reclamation plan update: 11/1994;
Last cost estimate update: 11/1994;
Operation ceased: 6/1996;
BLM cost estimate: No answer.
Diamond Peak Prospect Mtn;
Operation began: 6/2001;
Last plan of operation update: 8/2002;
Last reclamation plan update: 5/2001;
Last cost estimate update: 5/2001;
Operation ceased: 1/2003;
BLM cost estimate: No answer.
Eldorado Pediment;
Operation began: 8/2001;
Last plan of operation update: 10/2001;
Last reclamation plan update: 10/2001;
Last cost estimate update: 10/2001;
Operation ceased: 10/2003;
BLM cost estimate: No answer.
Phoenix Metals USA II Inc;
Operation began: 1/1997;
Last plan of operation update: 12/2001;
Last reclamation plan update: 2/1999;
Last cost estimate update: 9/1997;
Operation ceased: 12/2001;
BLM cost estimate: 11/2001.
American Canyon KOF;
Operation began: 1/2002;
Last plan of operation update: 5/2002;
Last reclamation plan update: Not applicable;
Last cost estimate update: 5/2002;
Operation ceased: 1/2002;
BLM cost estimate: No answer.
Jumbo Mine;
Operation began: 1/1983;
Last plan of operation update: 6/1986;
Last reclamation plan update: 4/1986;
Last cost estimate update: No answer;
Operation ceased: 1/1997;
BLM cost estimate: 1/1998.
Relief Canyon Mine;
Operation began: 1/1995;
Last plan of operation update: 5/1997;
Last reclamation plan update: 5/1994;
Last cost estimate update: 5/1997;
Operation ceased: 1/2001;
BLM cost estimate: No answer.
Elder Creek;
Operation began: 1/1989;
Last plan of operation update: 10/2000;
Last reclamation plan update: 12/1995;
Last cost estimate update: 2/1996;
Operation ceased: 1/2000;
BLM cost estimate: No answer.
Gold Bar Resource Area;
Operation began: 12/1986;
Last plan of operation update: 8/2004;
Last reclamation plan update: 9/2004;
Last cost estimate update: 12/1994;
Operation ceased: 12/1994;
BLM cost estimate: No answer.
Atlas Exploration;
Operation began: 1/1984;
Last plan of operation update: 12/1994;
Last reclamation plan update: 9/2004;
Last cost estimate update: 6/1994;
Operation ceased: 1/1994;
BLM cost estimate: No answer.
16: 1 Millsite;
Operation began: 4/1981;
Last plan of operation update: 3/1991;
Last reclamation plan update: No answer;
Last cost estimate update: 7/1991;
Operation ceased: 6/1992;
BLM cost estimate: 7/1992.
Gold Bar Mine;
Operation began: 1/1984;
Last plan of operation update: 8/2004;
Last reclamation plan update: 9/2004;
Last cost estimate update: 10/1994;
Operation ceased: 1/1994;
BLM cost estimate: No answer.
Paradise Peak;
Operation began: 12/1995;
Last plan of operation update: 5/1996;
Last reclamation plan update: 5/1996;
Last cost estimate update: 11/1995;
Operation ceased: 8/2003;
BLM cost estimate: No answer.
State: Washington:
Raven Hill Mining;
Operation began: 1/1995;
Last plan of operation update: 6/1995;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 1/1996;
BLM cost estimate: No answer.
Empire Creek Project;
Operation began: 4/1997;
Last plan of operation update: 4/1997;
Last reclamation plan update: No answer;
Last cost estimate update: 4/1997;
Operation ceased: Unknown;
BLM cost estimate: No answer.
Lamefoot;
Operation began: 1/1992;
Last plan of operation update: 11/1991;
Last reclamation plan update: No answer;
Last cost estimate update: No answer;
Operation ceased: 1/2001;
BLM cost estimate: No answer.
Source: BLM survey responses.
[End of table]
Table 16: BLM Steps to Compel Operators to Reclaim BLM Land Disturbed
by 48 Hardrock Operations That Had Ceased and Not Been Reclaimed by
Operators and the Reasons Operators Did Not Reclaim the Land:
State: Alaska:
Operation: Chapman Creek Mining;
BLM steps to compel reclamation: Notice of noncompliance; other (sent
letters);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Recently ceased; other
(operator tried unsuccessfully to sell).
Operation: R D Environmental Mining;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Other (claimant had
health problems).
Operation: Gold Hill Mining;
BLM steps to compel reclamation: Notice of noncompliance; other (issued
enforcement order);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Nixon Fork Mine;
BLM steps to compel reclamation: Other (worked with solicitor re:
bankruptcy);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
State: Arizona:
Operation: Tyro Mill;
BLM steps to compel reclamation: Other (issued orders);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Other (operator in
violation of two orders).
Operation: Granite Property;
BLM steps to compel reclamation: No action;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Unknown.
Operation: Herring Mine;
BLM steps to compel reclamation: Notice of noncompliance; other
(revoked plan);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: SKOR;
BLM steps to compel reclamation: No action;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: UFO;
BLM steps to compel reclamation: Other (tried to locate operator);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy; other
(operator failed to submit bond).
Operation: Ironwood Claim Group;
BLM steps to compel reclamation: Other (asked friends to do
reclamation);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Other (claimant died).
State: California:
Operation: Screech Owl;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Other (claimant had BLM
reclaim using financial assurance funds).
Operation: Nina;
BLM steps to compel reclamation: Other (negotiated bond release & claim
relinquishment);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy; other (BLM
reclaimed in exchange for forfeiture of claim).
State: Idaho:
Operation: West One Minerals;
BLM steps to compel reclamation: Notice of noncompliance; other
(attached bond);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
State: Montana:
Operation: Snowbound Placer;
BLM steps to compel reclamation: Notice of noncompliance; other (sent
letters);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Recently ceased; other
(operator was busy but promised to reclaim).
Operation: Zortman & Landusky Mine;
BLM steps to compel reclamation: Other (filed bankruptcy claim & worked
with state re: bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Zortman Exploration Plans;
BLM steps to compel reclamation: Other (unsuccessfully tried to have
financial assurance provider do work);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
State: Nevada:
Operation: Adelaide Crown;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Wildhorse Canyon;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: South Hy/Isabella;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Hogum or Golden Eagle;
BLM steps to compel reclamation: Other (legal procedures to obtain
bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Golden Butte;
BLM steps to compel reclamation: Other (legal procedures to obtain
bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Pan Project;
BLM steps to compel reclamation: Other (legal procedures to obtain
bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Monte Exploration;
BLM steps to compel reclamation: Other (legal procedures to obtain
bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Ward Mine;
BLM steps to compel reclamation: Other (legal procedures to obtain
bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Easy Jr;
BLM steps to compel reclamation: Other (legal procedures to obtain
bond);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: MacArthur Mine;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy; other
(operator believes reclamation will affect sale).
Operation: Northern Crown Mines;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Other (ceased
operations in 1993;
no BLM action since).
Operation: Maverick Springs;
BLM steps to compel reclamation: Other (sent letters);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Other (civil action).
Operation: Phil Claims Expl Proj;
BLM steps to compel reclamation: Notice of noncompliance; other (sent
letters & made phone calls);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Other (operator would
like to continue work, but has no funds).
Operation: Kinsley;
BLM steps to compel reclamation: No action;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: County Line Project;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Olinghouse Mine;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy; other
(financial assurance provider went bankrupt, but did some work).
Operation: Mina Mill;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Other (operator died &
spouse has no funds for reclamation).
Operation: Diamond Peak Prospect Mtn;
BLM steps to compel reclamation: Other (sent notice of expiration);
Operator did some reclamation: No answer;
Reasons operators did not complete reclamation: Unknown.
Operation: Eldorado Pediment;
BLM steps to compel reclamation: Other (sent expiration letter);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Recently ceased
operation.
Operation: Phoenix Metals USA II Inc;
BLM steps to compel reclamation: Other (civil action & obtained court
order to seize property);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Other (operator died).
Operation: American Canyon KOF;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Other (operator fled).
Operation: Jumbo Mine;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Relief Canyon Mine;
BLM steps to compel reclamation: Notice of noncompliance; other
(revoked plan);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Other (another operator
assumed responsibility).
Operation: Elder Creek;
BLM steps to compel reclamation: Other (sent letters);
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Gold Bar Resource Area;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Atlas Exploration;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: 16: 1 Millsite;
BLM steps to compel reclamation: No action;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Gold Bar Mine;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Paradise Peak;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: No;
Reasons operators did not complete reclamation: Bankruptcy.
State: Washington:
Operation: Raven Hill Mining;
BLM steps to compel reclamation: Notice of noncompliance;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy.
Operation: Empire Creek Project;
BLM steps to compel reclamation: No action;
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: Bankruptcy; other
(project languished and was never completed).
Operation: Lamefoot;
BLM steps to compel reclamation: Other (awaiting operator decision re:
closure);
Operator did some reclamation: Some reclamation;
Reasons operators did not complete reclamation: No answer.
Source: BLM survey responses.
[End of table]
Table 17: Estimated Reclamation Costs for 48 Hardrock Operations That
Had Ceased and Not Been Reclaimed by Operators:
State: Alaska:
Operation: Chapman Creek Mining;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $0.
Operation: R D Environmental Mining;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: $139,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $139,000.
Operation: Gold Hill Mining;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $500,000 needed to complete reclamation;
Most recent reclamation cost estimate as of July 2004: $500,000.
Operation: Nixon Fork Mine;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $0.
State: Arizona:
Operation: Tyro Mill;
Operators cost estimate before operation ceased: $47,023;
BLM cost estimate after operations ceased: $800,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $300,000 needed to complete reclamation and $800,000
actual;
Most recent reclamation cost estimate as of July 2004: $800,000.
Operation: Granite Property;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $0.
Operation: Herring Mine;
Operators cost estimate before operation ceased: $1,800;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $34,000 needed to complete and;
$34,000 actual;
Most recent reclamation cost estimate as of July 2004: $34,000.
Operation: SKOR;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: $88,240;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $92,239 actual cost;
Most recent reclamation cost estimate as of July 2004: $92,239.
Operation: UFO;
Operators cost estimate before operation ceased: $24,000;
BLM cost estimate after operations ceased: $18,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $18,000.
Operation: Ironwood Claim Group;
Operators cost estimate before operation ceased: $200;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $200.
State: California:
Operation: Screech Owl;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $2,431 actual cost;
Most recent reclamation cost estimate as of July 2004: $2,431.
Operation: Nina;
Operators cost estimate before operation ceased: $5,000;
BLM cost estimate after operations ceased: $15,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $15,000.
State: Idaho:
Operation: West One Minerals;
Operators cost estimate before operation ceased: $12,000;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $12,000.
State: Montana:
Operation: Snowbound Placer;
Operators cost estimate before operation ceased: $2,970;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $2,970 needed to complete and $2,970 actual;
Most recent reclamation cost estimate as of July 2004: $2,970.
Operation: Zortman & Landusky Mine;
Operators cost estimate before operation ceased: $68,500,000;
BLM cost estimate after operations ceased: $85,200,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $18,500,000 needed to complete and $25,200,000 shortfall;
Most recent reclamation cost estimate as of July 2004: $85,200,000.
Operation: Zortman Exploration Plans;
Operators cost estimate before operation ceased: $299,043;
BLM cost estimate after operations ceased: $299,043;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $299,043.
State: Nevada:
Operation: Adelaide Crown;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $0.
Operation: Wildhorse Canyon;
Operators cost estimate before operation ceased: $52,310;
BLM cost estimate after operations ceased: $53,006;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $53,000 needed to complete;
Most recent reclamation cost estimate as of July 2004: $53,000.
Operation: South Hy/Isabella;
Operators cost estimate before operation ceased: $122,369;
BLM cost estimate after operations ceased: $169,593;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $169,700 needed to complete;
Most recent reclamation cost estimate as of July 2004: $169,700.
Operation: Hogum or Golden Eagle;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $0.
Operation: Golden Butte;
Operators cost estimate before operation ceased: $328,942;
BLM cost estimate after operations ceased: $1,397,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $400,000 needed to complete and $1,068,000 shortfall;
Most recent reclamation cost estimate as of July 2004: $1,397,000.
Operation: Pan Project;
Operators cost estimate before operation ceased: $5,670;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $5,670.
Operation: Monte Exploration;
Operators cost estimate before operation ceased: $7,395;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $7,395.
Operation: Ward Mine;
Operators cost estimate before operation ceased: $141,500;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $141,500.
Operation: Easy Jr;
Operators cost estimate before operation ceased: $365,917;
BLM cost estimate after operations ceased: $668,936;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $100,000 needed to complete and $400,000 shortfall;
Most recent reclamation cost estimate as of July 2004: $668,936.
Operation: MacArthur Mine;
Operators cost estimate before operation ceased: No Answer;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $17,000,000 shortfall over $47,000 funds relinquished;
Most recent reclamation cost estimate as of July 2004: $17,047,000.
Operation: Northern Crown Mines;
Operators cost estimate before operation ceased: $3,897;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $3,897.
Operation: Maverick Springs;
Operators cost estimate before operation ceased: No Answer;
BLM cost estimate after operations ceased: $7,999;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $37,846 needed to complete;
Most recent reclamation cost estimate as of July 2004: $37,846.
Operation: Phil Claims Expl Proj;
Operators cost estimate before operation ceased: $28,556;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $28,556.
Operation: Kinsley;
Operators cost estimate before operation ceased: $911,763;
BLM cost estimate after operations ceased: $1,400,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $550,000 needed to complete and $500,000 shortfall;
Most recent reclamation cost estimate as of July 2004: $1,400,000.
Operation: County Line Project;
Operators cost estimate before operation ceased: $837,356;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $837,356.
Operation: Olinghouse Mine;
Operators cost estimate before operation ceased: $850,650;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $850,650.
Operation: Mina Mill;
Operators cost estimate before operation ceased: $116,408;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $116,408.
Operation: Diamond Peak Prospect Mtn;
Operators cost estimate before operation ceased: $6,500;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $6,500.
Operation: Eldorado Pediment;
Operators cost estimate before operation ceased: $8,200;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $8,200.
Operation: Phoenix Metals USA II Inc;
Operators cost estimate before operation ceased: $45,904;
BLM cost estimate after operations ceased: $100,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $30,000 needed to complete;
Most recent reclamation cost estimate as of July 2004: $100,000.
Operation: American Canyon KOF;
Operators cost estimate before operation ceased: $21,600;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $21,600.
Operation: Jumbo Mine;
Operators cost estimate before operation ceased: $8,197;
BLM cost estimate after operations ceased: $3,700;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $2,500 needed to complete;
Most recent reclamation cost estimate as of July 2004: $3,700.
Operation: Relief Canyon Mine;
Operators cost estimate before operation ceased: $888,696;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $463,500 needed to complete;
Most recent reclamation cost estimate as of July 2004: $888,696.
Operation: Elder Creek;
Operators cost estimate before operation ceased: $256,062;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $256,062.
Operation: Gold Bar Resource Area;
Operators cost estimate before operation ceased: $303,300;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $303,300.
Operation: Atlas Exploration;
Operators cost estimate before operation ceased: $265,000;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $265,000.
Operation: 16: 1 Millsite;
Operators cost estimate before operation ceased: $124,017;
BLM cost estimate after operations ceased: $458,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $458,000.
Operation: Gold Bar Mine;
Operators cost estimate before operation ceased: $2,608,000;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $2,608,000.
Operation: Paradise Peak;
Operators cost estimate before operation ceased: $5,461,537;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: $20,000,000 shortfall over $1,157,000 funds relinquished;
Most recent reclamation cost estimate as of July 2004: $21,157,000.
State: Washington:
Operation: Raven Hill Mining;
Operators cost estimate before operation ceased: $6,700;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $6,700.
Operation: Empire Creek Project;
Operators cost estimate before operation ceased: $7,125;
BLM cost estimate after operations ceased: No answer;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $7,125.
Operation: Lamefoot;
Operators cost estimate before operation ceased: No answer;
BLM cost estimate after operations ceased: $20,000;
Actual cost or estimate of shortfall or funds needed to complete
reclamation: No estimate;
Most recent reclamation cost estimate as of July 2004: $20,000.
Source: BLM survey responses.
[End of table]
Table 18: Types and Amount of Financial Assurances and the Amount of
Financial Assurances Relinquished and Spent on Reclamation of 48
Hardrock Operations That Had Ceased and Not Been Reclaimed by
Operators:
State: Alaska:
Operation: Chapman Creek Mining;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-no value reported;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: R D Environmental Mining;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-$139,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Gold Hill Mining;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-$15,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Nixon Fork Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-no value reported;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
State: Arizona:
Operation: Tyro Mill;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Granite Property;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$2,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Herring Mine;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: SKOR;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: UFO;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Ironwood Claim Group;
Financial assurance: Yes;
Types and amount of financial assurances: Cash-$200;
Types and amount relinquished: Cash-$200;
Types and amount spent: Cash-$200.
State: California:
Operation: Screech Owl;
Financial assurance: Yes;
Types and amount of financial assurances: Certificate of deposit-
$2,431;
Types and amount relinquished: Certificate of deposit-$2,431;
Types and amount spent: Certificate of deposit-$2,431.
Operation: Nina;
Financial assurance: Yes;
Types and amount of financial assurances: Certificate of deposit-
$5,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
State: Idaho:
Operation: West One Minerals;
Financial assurance: Yes;
Types and amount of financial assurances: Letter of credit-$12,000;
Types and amount relinquished: Letter of credit-$12,000;
Types and amount spent: Letter of credit-$12,000.
State: Montana:
Operation: Snowbound Placer;
Financial assurance: Yes;
Types and amount of financial assurances: Cash-$2,970;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Zortman & Landusky Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$43,500,000;
other-$14,300,000;
Types and amount relinquished: Surety bond-$31,200,000 other-
$2,000,000;
Types and amount spent: Surety bond-$31,200,000 other-$1,800,000.
Operation: Zortman Exploration Plans;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$299,043;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
State: Nevada:
Operation: Adelaide Crown;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Wildhorse Canyon;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-$12,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: South Hy/Isabella;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-$22,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Hogum or Golden Eagle;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$24,000;
Types and amount relinquished: Surety bond-$24,000;
Types and amount spent: Surety bond-none.
Operation: Golden Butte;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$328,942;
Types and amount relinquished: Surety bond-$328,942;
Types and amount spent: Surety bond-none.
Operation: Pan Project;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$5,670;
Types and amount relinquished: Surety bond-$5,670;
Types and amount spent: Surety bond-none.
Operation: Monte Exploration;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$7,395;
Types and amount relinquished: Surety bond-$7,395;
Types and amount spent: Surety bond-none.
Operation: Ward Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$141,500;
Types and amount relinquished: Surety bond-$141,500;
Types and amount spent: Surety bond-none.
Operation: Easy Jr;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$365,917;
Types and amount relinquished: Surety bond-$365,917;
Types and amount spent: Surety bond-none.
Operation: MacArthur Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$47,000;
corporate guarantee-$137,300;
Types and amount relinquished: Surety bond-$47,000;
corporate guarantee-none;
Types and amount spent: Surety bond-none;;
corporate guarantee-not applicable.
Operation: Northern Crown Mines;
Financial assurance: Yes;
Types and amount of financial assurances: Cash-$3,897;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Maverick Springs;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Phil Claims Expl Proj;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-$28,556;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Kinsley;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$911,763;
Types and amount relinquished: Surety bond-$911,763;
Types and amount spent: Surety bond-$561,763.
Operation: County Line Project;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$210,000;
corporate guarantee-$628,017;
Types and amount relinquished: Surety bond-$210,000;
corporate guarantee-none relinquished;
Types and amount spent: Surety bond-none[A] Corporate guarantee-not
applicable.
Operation: Olinghouse Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$1,800,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Mina Mill;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Diamond Peak Prospect Mtn;
Financial assurance: Yes;
Types and amount of financial assurances: Letter of credit-$6,500;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Eldorado Pediment;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$8,200;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Phoenix Metals USA II Inc;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$45,904;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: American Canyon KOF;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$5,314;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Jumbo Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Certificate of deposit-
$10,000;
Types and amount relinquished: Certificate of deposit-$4,323;
Types and amount spent: Certificate of deposit-$1,800.
Operation: Relief Canyon Mine;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Elder Creek;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$256,062;
Types and amount relinquished: Surety bond-$256,062;
Types and amount spent: Surety bond-none.
Operation: Gold Bar Resource Area;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$303,300;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Atlas Exploration;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$267,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: 16: 1 Millsite;
Financial assurance: Yes;
Types and amount of financial assurances: Bond pool-$124,017;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Gold Bar Mine;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$2,608,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Operation: Paradise Peak;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$1,157,000;
corporate guarantee-$3,468,148;
Types and amount relinquished: Surety bond-$1,157,000;
corporate guarantee-none relinquished;
Types and amount spent: Surety bond-none;
corporate guarantee-not applicable.
State: Washington:
Operation: Raven Hill Mining;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Empire Creek Project;
Financial assurance: No;
Types and amount of financial assurances: No financial assurances;
Types and amount relinquished: Not applicable;
Types and amount spent: Not applicable.
Operation: Lamefoot;
Financial assurance: Yes;
Types and amount of financial assurances: Surety bond-$3,000,000;
Types and amount relinquished: None relinquished;
Types and amount spent: Not applicable.
Source: BLM survey responses.
[A] BLM told us in February 2005 that, as of December 2004, some of the
surety bond funds had been obligated to review and determine
reclamation design and costs.
[End of table]
Table 19: Sources of Other Funds and the Status of Reclamation of 48
Hardrock Operations That Had Ceased and Not Been Reclaimed by
Operators:
State: Alaska:
Operation: Chapman Creek Mining;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 96-99%;
Likelihood reclamation will be completed: Very likely.
Operation: R D Environmental Mining;
Sources and amount of funds received from others: BLM-$65,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 86-95%;
Likelihood reclamation will be completed: Very likely.
Operation: Gold Hill Mining;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Somewhat likely.
Operation: Nixon Fork Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 26-50%;
Likelihood reclamation will be completed: Very likely.
State: Arizona:
Operation: Tyro Mill;
Sources and amount of funds received from others: BLM-$517,088;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 76-85%;
Likelihood reclamation will be completed: Very likely.
Operation: Granite Property;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: About as likely as unlikely.
Operation: Herring Mine;
Sources and amount of funds received from others: BLM-$34,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Very likely.
Operation: SKOR;
Sources and amount of funds received from others: BLM-$92,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 100%;
Likelihood reclamation will be completed: Not applicable-reclamation
complete.
Operation: UFO;
Sources and amount of funds received from others: BLM-$35,110;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 76-85%;
Likelihood reclamation will be completed: Somewhat likely.
Operation: Ironwood Claim Group;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: 100%;
Likelihood reclamation will be completed: Not applicable-reclamation
complete.
State: California:
Operation: Screech Owl;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 100%;
Likelihood reclamation will be completed: Not applicable-reclamation
complete.
Operation: Nina;
Sources and amount of funds received from others: BLM-$15,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 100%;
Likelihood reclamation will be completed: Not applicable-reclamation
complete.
State: Idaho:
Operation: West One Minerals;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 100%;
Likelihood reclamation will be completed: Not applicable-reclamation
complete.
State: Montana:
Operation: Snowbound Placer;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Somewhat unlikely.
Operation: Zortman & Landusky Mine;
Sources and amount of funds received from others: BLM-$5,594,500;[A]
operator-$1,050,000;
EPA-$340,000;
MT DEQ-$1,697,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 86-95%;
Likelihood reclamation will be completed: Very likely.
Operation: Zortman Exploration Plans;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: 76-85%;
Likelihood reclamation will be completed: Very likely.
State: Nevada:
Operation: Adelaide Crown;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Very unlikely.
Operation: Wildhorse Canyon;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: About as likely as unlikely.
Operation: South Hy/Isabella;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: About as likely as unlikely.
Operation: Hogum or Golden Eagle;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Very likely.
Operation: Golden Butte;
Sources and amount of funds received from others: U.S. Army Corps of
Engineers-$600,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 51-5%;
Likelihood reclamation will be completed: Very likely.
Operation: Pan Project;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 96-99%;
Likelihood reclamation will be completed: Very likely.
Operation: Monte Exploration;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 96-99%;
Likelihood reclamation will be completed: Very likely.
Operation: Ward Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Very likely.
Operation: Easy Jr;
Sources and amount of funds received from others: BLM-$300,000;
U.S. Army Corps of Engineers-$171,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 51-75%;
Likelihood reclamation will be completed: Very likely.
Operation: MacArthur Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Very unlikely.
Operation: Northern Crown Mines;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No Answer;
Percent of reclamation complete: Do not know;
Likelihood reclamation will be completed: Very unlikely.
Operation: Maverick Springs;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No Answer;
Percent of reclamation complete: Do not know;
Likelihood reclamation will be completed: Somewhat likely.
Operation: Phil Claims Expl Proj;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Very likely.
Operation: Kinsley;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 51-75%;
Likelihood reclamation will be completed: Very likely.
Operation: County Line Project;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 26-50%;
Likelihood reclamation will be completed: Very unlikely.
Operation: Olinghouse Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: 86-95%;
Likelihood reclamation will be completed: Very unlikely.
Operation: Mina Mill;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: About as likely as unlikely.
Operation: Diamond Peak Prospect Mtn;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: Do not know;
Likelihood reclamation will be completed: Very likely.
Operation: Eldorado Pediment;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Very likely.
Operation: Phoenix Metals USA II Inc;
Sources and amount of funds received from others: BLM-$50,000;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 76-85%;
Likelihood reclamation will be completed: Very likely.
Operation: American Canyon KOF;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: About as likely as unlikely.
Operation: Jumbo Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: 96-99%;
Likelihood reclamation will be completed: Very likely.
Operation: Relief Canyon Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 26-50%;
Likelihood reclamation will be completed: Somewhat unlikely.
Operation: Elder Creek;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Very likely.
Operation: Gold Bar Resource Area;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Somewhat likely.
Operation: Atlas Exploration;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Somewhat likely.
Operation: 16: 1 Millsite;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Somewhat unlikely.
Operation: Gold Bar Mine;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: Yes;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Somewhat likely.
Operation: Paradise Peak;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No;
Percent of reclamation complete: None;
Likelihood reclamation will be completed: Very likely.
State: Washington:
Operation: Raven Hill Mining;
Sources and amount of funds received from others: BLM-$2,500;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 26-50%;
Likelihood reclamation will be completed: Very unlikely.
Operation: Empire Creek Project;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: Do not know;
Likelihood reclamation will be completed: No answer.
Operation: Lamefoot;
Sources and amount of funds received from others: None;
BLM made arrangements for the financial assurance provider to do the
reclamation: No answer;
Percent of reclamation complete: 1-25%;
Likelihood reclamation will be completed: Very likely.
Source: BLM survey responses.
[A] Lewistown Montana BLM field office officials told us that BLM
provided an additional $550,000 after July 2004 and before September
2004.
[End of table]
[End of section]
Appendix IV: Comments from the Department of the Interior:
United States Department of the Interior:
OFFICE OF THE SECRETARY:
Washington, D.C. 20240
In Reply Refer To: 1245 (830):
JUN 8 2005:
Ms. Robin M. Nazzaro:
Director, Natural Resources and Environment:
Government Accountability Office:
441 G Street, NW:
Washington, DC 20548-0001:
Dear Ms. Nazzaro:
Thank you for the opportunity to respond to the U.S. Government
Accountability Office (GAO) Draft Report, Hardrock Mining-BLM Needs to
Better Manage Financial Assurances to Guarantee Coverage of Reclamation
Costs (GAO-05-377).
The draft report captures many of the demands facing the Mining Law
Administration, Surface Management Program of the Bureau of Land
Management (BLM) related to managing financial guarantees required for
operations authorized under the General Mining Law of 1872, as amended
(Mining Law). Following are our responses to the recommendations and
some suggested changes within the report.
Responses to the Recommendations:
Recommendation #1: We recommend that the Secretary of the Interior
direct the Director of BLM to require the BLM state office directors to
establish an action plan for ensuring that operators of hardrock
operations have required financial assurances, and that the financial
assurances are based on sound reclamation plans and current cost
estimates so they are adequate to pay all of the estimated costs of
required reclamation if operators fail to complete the reclamation.
Existing procedures and policies ensure financial guarantees are in
place to protect the public should an operator fail to reclaim. The
regulations at 43 CFR 3809 require the operator to provide a financial
guarantee that covers the full reclamation cost for the operation. The
regulations also require the BLM to conduct a periodic review of the
reclamation cost estimate and the financial guarantee. BLM issued
guidance on February 5, 2003 (IM 2003-082) on the review and acceptance
of financial guarantee cost estimates for Notices and Plans of
operations under the 43 CFR 3809 Surface Management regulations. This
guidance was updated on March 1, 2004 (IM 2003-082, Change 1). The
guidance provides specific timeframes within which reclamation cost
estimates must be reviewed for adequacy. The guidance requires: cost
estimates for Notices are to be reviewed at time of extension (every
two years); reclamation cost estimates for Plans of Operations are to
be reviewed at least every three years; financial guarantees for part
of an operation are to have the cost estimate reviewed annually;
anytime an operation is modified, the cost estimate for the entire
operation is to be reviewed; and if there is an agreement with the
State dealing with financial guarantees and the State has review
timeframes more stringent than the BLM's, the State's more stringent
timeframe must be met.
Ensuring that the financial guarantees for operations authorized under
the Mining Law meet the requirements of the regulations are a priority
of the BLM's Surface Management Program. The importance of having
adequate financial guarantees in place for all operations is stressed
through the budget process and in directives issued by the BLM-
Washington Office and State Offices.
In summary, we do not concur with this recommendation because the BLM
has recently updated and implemented national policy and field guidance
to ensure bond adequacy.
Recommendation #2: We recommend that the Secretary of the Interior
direct the Director of BLM to modify LR2000 to ensure that it tracks
critical information on hardrock operations and associated financial
assurances so that BLM headquarters and state offices can effectively
manage financial assurances nationwide to ensure regulatory
requirements are met.
The BLM tracks all critical information on authorized operations in
LR2000, which include case recordation and the bond and surety systems.
BLM issued Instruction Memorandum No. 2005-126 on April 29, 2005 to
provide guidance and direction on data standards for LR2000. Recently,
the BLM added codes and edits to LR2000 for Plans of Operations,
environmental analyses, financial guarantees and appeals. The BLM will
continue to refine and enhance LR2000 data systems as needed to
facilitate the surface management program.
Suggested changes within the report:
Report title: Consider changing the report title to BLMNeeds to Better
Manage Financial Assurances "that" Guarantee Coverage of Reclamation
Costs.
Page 3, 2nd paragraph, after last sentence add: Plans of Operations
that were approved on or before January 20, 2001, were required to have
financial guarantees in place that met the requirements of the
regulations on November 20, 2001.
Page 4, 1st paragraph, revise sentence from "..give BLM authority to
take steps, such as issuing notices of noncompliance and revoking plans
of operations" to "..give BLM authority to take steps, such as issuing
noncompliance and suspension orders, and revoking plans of
operations.." We suggest this because the previous regulations (43 CFR
3809, October 1, 2000) used the term "notice of noncompliance." The
current regulations use the term "noncompliance and suspension orders."
Page 5, 1st paragraph, 2nd sentence "..with operations identified by
others" If possible, identify GAO's "Others."
Page 11, Figure 2 footnote: If possible, identify "others."
Page 11, Figure 2: Remove Step 5. The reason we suggest removal of the
step is the operation described in the figure is employing a heap-
leaching process. However, the described operation includes a tailings
pile. There are no tailings in heap-leaching operations. Tailings piles
are associated with operations that employ milling and flotation.
Page 12, 2nd paragraph, 2nd sentence, change to read: Upon recording a
mining claim with BLM, the claimant must pay, per claim, an initial
location fee, and a maintenance fee that is required annually; the
claimant is not required to pay royalties on any hardrock minerals
extracted.
Page 20, 1st paragraph: To clarify this paragraph please include the
following: Approved operations on notices and plans of operations are
subject to the claimant or operator filing and obtaining approval of
the financial guarantee instrument from BLM in accordance with
regulations and policy.
Page 21, paragraph: For consistency with information on page 20, add
"notice-and plan-level" before ". . . hardrock operations...
Page 63, Conclusions: We disagree with the 4th sentence that reads "BLM
has no process in place to ensure that operators obtain adequate
financial assurance." As stated under Recommendation #1, the BLM
process as mandated in regulations and guidance adequately addresses
the financial obligations of an operator for notice-level and plan-
level hardrock mining operations. In addition, we do not agree with the
sentence "Specifically, LR2000 does not track the status of hardrock
operations.." As noted under our response to Recommendation 2, BLM
tracks all critical information on authorized operations in the LR2000
database.
We appreciate the advice and critical assessment the GAO has given to
BLM's Mining Law Administration, Surface Management Program. If you
have any questions, please contact Ted Murphy, Chief, Division of Solid
Minerals, at 202-452-0351, or Andrea Nygren, BLM Audit Liaison Officer,
at 202-452-5153.
Sincerely,
Rebecca W. Watson:
Assistant Secretary:
Land and Minerals Management:
The following are GAO's comments on the Department of the Interior's
letter dated June 8, 2005.
GAO Comments:
1. See agency comments and our evaluation section of this report.
2. See agency comments and our evaluation section of this report.
3. We did not change the title of the report because doing so would
indicate that adequate financial assurances are in place to guarantee
reclamation costs. As we report, this is not the case.
4. We added a sentence to state that plans of operations that were
approved before January 20, 2001, were required to have financial
assurances in place no later than November 20, 2001.
5. We changed the language to state that BLM has the authority to take
steps, such as issuing noncompliance and suspension orders or revoking
plans of operations, if operators do not comply with financial
assurance or other regulatory requirements.
6. The "other" sources of information on hardrock operations that had
ceased and not been reclaimed, as required, are identified in appendix
I.
7. We added the National Research Council as one of the other sources
used to develop figure 2.
8. We removed step 5, which described leftover material known as
tailings, from figure 2.
9. We changed the language to clarify that upon recording a mining
claim with BLM, the claimant must pay the fees discussed in our report,
and that the location fee is not paid annually.
10. We did not add this language to this section of the report because
we explain in the background section of the report that BLM requires
all notice-and plan-level hardrock operations to have financial
assurances before exploration or mining operations begin.
11. We clarified the language by adding "notice-and plan-level" before
hardrock operations.
12. We clarified this sentence in our conclusion to state that
"However, while federal regulations and BLM guidance set forth
financial assurance requirements for notice-and plan-level hardrock
mining operations, BLM has no process for ensuring that the regulations
and guidance are effectively implemented to ensure that adequate
financial assurances are in place, as required." Our report shows that
BLM state offices with hardrock operations reported that, as of July
2004, some hardrock operations did not have adequate financial
assurances. Furthermore, past experience has shown that some hardrock
operations have ceased without operators having the adequate financial
assurances required by regulations and BLM guidance. We continue to
believe that until BLM establishes monitoring and accountability
mechanisms to ensure that all hardrock operations have required
financial assurances based on sound plans and current cost estimates,
these problems will continue.
13. We did not change this sentence in our conclusion because evidence
in our report shows that LR2000 does not track the critical information
BLM needs to effectively manage financial assurances on hardrock
operations. Specifically, we reported that LR2000 does not track some
critical information, including the operation's basic status, such as
whether the operation is ongoing or has ceased and should be reclaimed;
some types of financial assurances being used, such as corporate
guarantees, bond pools, and trust funds; and the adequacy of financial
assurances to pay the cost of required reclamation.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Robin M. Nazzaro (202) 512-3841:
Acknowledgments:
In addition to the contact named above, Andrea Wamstad Brown, Byron S.
Galloway, Heather Holsinger, Carol Herrnstadt Shulman, Walter Vance,
and Amy Webbink made key contributions to this report.
(360411):
FOOTNOTES
[1] Individuals include citizens and people declaring an intention to
become citizens.
[2] For simplicity in this report, we refer to claimants and operators
as operators. An operator is the person who conducts operations in
connection with exploration, mining, and processing hardrock minerals
on BLM land. Both the claimant and operator are responsible for
reclamation.
[3] BLM manages about 261 million acres, most of which are located in
12 western states, including Alaska. Other federal agencies, such as
the Department of Agriculture's Forest Service, also manage federal
land available for hardrock operations. For simplicity in this report,
we refer to BLM-managed land as BLM land.
[4] The regulations stated that in lieu of a bond, the operator (1)
could deposit in a federal depository account of the United States,
directed by BLM, cash or negotiable U.S. securities or (2) show
evidence of an existing bond provided for the operation pursuant to
state law or regulations.
[5] Financial assurances could have been payable to either BLM or the
designated state agency, depending on the terms of the agreement
between BLM and the state, which are to coordinate efforts and avoid
duplication of financial assurances and other requirements. These
agreements may establish joint federal-state program management and
enforcement of hardrock operations on BLM land or assign primary
responsibility for management to either BLM or the state.
[6] GAO, Importance of Financial Guarantees for Ensuring Reclamation of
Federal Lands, GAO/T-RCED-89-13 (Washington, D.C.: Mar. 7, 1989).
[7] BLM Instruction Memorandum No. 90-582, Modification of Bonding
Policy for Plans of Operation Authorized by 43 CFR 3809 (Aug. 14,
1990).
[8] Before the 2001 regulations, notice-level operations did not have
an expiration date. The 2001 regulations stated that all notices filed
on or after January 20, 2001, would be extended only for 2 years, after
which they would have to be renewed or would expire.
[9] Some of the 12 BLM state offices manage BLM programs in more than
one state. For example, the BLM Montana state office manages BLM
programs in Montana, North Dakota, and South Dakota, and the BLM Oregon
state office manages BLM programs in Oregon and Washington.
[10] In our survey instructions, we defined existing operations to
include those hardrock operations that (1) are pending BLM acceptance,
(2) have been accepted but operations have not begun, (3) are ongoing,
and (4) are temporarily inactive. While federal regulations require
reclamation plans and cost estimates for all of these operations, they
do not require financial assurances for those pending BLM acceptance or
those that have been accepted but have not begun exploration or mining
operations.
[11] Acid drainage occurs when water and oxygen contact rock with
sulfides and sulfates and form acids that can be released into the
environment.
[12] 30 U.S.C. § 22.
[13] Under U.S. mining laws, minerals are classified as locatable,
leasable, or saleable. Locatable minerals--often referred to as
hardrock minerals--include, for example, copper, lead, zinc, magnesium,
gold, silver, and uranium. Only hardrock minerals continue to be
"claimed" under the Mining Act. Leasable minerals include, for example,
oil, gas, and coal. The Mineral Leasing Act of 1920, 41 Stat. 437
(codified at 30 U.S.C. § 181) created a leasing system for coal, gas,
oil and other fuels, and chemical minerals. Saleable minerals include,
for example, common sand, stone, and gravel. In 1955, the Multiple Use
Mining Act of 1955, 69 Stat. 367 (codified at 30 U.S.C. § 601) removed
common varieties of sand, stone, and gravel from development under the
Mining Act.
[14] The location and maintenance fees were reduced from $30 and $125,
respectively, by the Consolidated Appropriations Act, 2005, and will
not be reinstated until, among other things, BLM establishes a
nationwide system to track the length of time between submission and
approval of a hardrock plan of operation.
[15] Pub. L. No. 94-579 (1976) (codified at 43 U.S.C. § 1701).
[16] In addition, hardrock mining operations on BLM land may be subject
to a variety of federal environmental laws, such as the National
Environmental Policy Act, the Endangered Species Act, and the Clean
Water Act. States can also pass their own laws for regulating hardrock
operations in their state, including operations on BLM land.
[17] BLM's Surface Management Program for hardrock operations began in
1981 with the issuance of these regulations (43 C.F.R. 3809), which
apply only to hardrock operations.
[18] For notice-level operations with a history of noncompliance, BLM
had to first require the operator to file a plan of operation.
[19] GAO/T-RCED-89-13.
[20] The Department of the Treasury reviews insurance companies to
determine whether they qualify to underwrite insurance and annually
publishes the list of qualified companies in Treasury Circular 570.
[21] The Securities Investors Protection Corporation is a nonprofit
corporation created by Congress and funded by its member securities
brokers and dealers to protect investors by returning cash, stock, and
other securities if the brokerage firm goes bankrupt.
[22] The state must agree that, upon BLM's request, it will use part of
the bond pool to meet reclamation obligations on public land. In
addition, the BLM state office director must determine that the bond
pool provides the equivalent level of protection as otherwise required.
[23] BLM reported a total of 1,704 notice-level operations and 786 plan-
level hardrock operations in these 12 states. The BLM Montana state
office, which also has jurisdiction over North Dakota and South Dakota,
reported that South Dakota has only two hardrock operations and that
both have ceased operating and are being reclaimed by the operators.
For this reason, South Dakota was not included as a state with existing
hardrock operations.
[24] We asked each of the 12 BLM state offices, for each state within
their jurisdiction with hardrock operations, to rate the effectiveness
of each type of financial assurance in minimizing losses to the federal
government based on their experience. The rating categories were very
effective, effective, moderately effective, somewhat effective, and not
effective.
[25] The cost to an operator to participate in the Alaska state bond
pool is calculated by multiplying the total number of acres to be
disturbed by an operator by $150.00. The $150.00 includes a refundable
reclamation deposit of $112.50 per acre and an annual nonrefundable
administrative fee of $37.50 per acre. The fees for entry into the
Alaska state bond pool were determined to be the average costs for
reclamation per acre in the state for placer operations--those that
involve extracting gold or other minerals from stream or beach sediment
by gravity using water separation and typically do not use leaching
chemicals. Operations using cyanide or other chemicals for leaching are
not authorized to use the Alaska state bond pool and must secure
another form of financial assurance.
[26] The Alaska bond pool covers all hardrock operations on federal,
state, and private lands in the state.
[27] For bonds under $10,000, the deposit is 100 percent of the bond
amount, and the annual premium is 3 percent of the bond amount. For
bonds of $10,000 and greater, the deposit is 50 percent of the bond
amount, escalating linearly to 80 percent at the cap; and the annual
premium is 10 percent of the bond amount, declining linearly to 5
percent at the cap. Interest earned remains in the pool's account, and
the deposit is returned to the operator when the bond is released
following successful reclamation. Premiums are not returned to the
operator.
[28] BLM reported estimates before and/or after operations ceased. (See
app. III, table 17 for details.) We used the most recent complete cost
estimate to determine total estimated costs. (See app. I for detailed
methodology.)
[29] For the other six states with hardrock operations--Colorado, New
Mexico, Oregon, South Dakota, Utah, and Wyoming--BLM reported that no
operations had ceased and not been reclaimed by operators since it
began requiring financial assurances.
[30] See appendix I for details on how the most recent cost estimates
were identified.
[31] BLM officials told us in February 2005 that, as of December 2004,
some of the surety bond funds had been obligated to review and
determine reclamation designs and costs.
[32] BLM officials told us in February 2005 that, as of December 2004,
about 75 percent of the reclamation had been completed and that the
heap-leach pad and process ponds were the remaining features to be
reclaimed.
[33] The Yerington Mine, which is on BLM and private land, was mined by
the Anaconda Copper Company from 1953 to 1978 (before BLM required
reclamation or financial assurances) and was purchased by the Atlantic
Richfield Company in 1977 and sold to a private entrepreneur in 1978.
The entrepreneur sold the Yerington land to Arimetco in 1988.
[34] 42 U.S.C. §§ 9601-9675.
[35] BLM officials advised us that their most recent reclamation cost
estimates for the MacArthur Mine pit and waste piles was $350,000 and
for the haul road was $1.15 million. They also said that, assuming the
estimate for the bankruptcy court was correct, over $15.5 million of
the cleanup costs for the leach heaps on the Yerington Mine used to
extract copper from the MacArthur pit will be included in the CERCLA
cleanup costs. The officials said that the total reclamation costs for
the Yerington Mine had not yet been estimated.
[36] Of the remaining 11 operations, 3 had been reclaimed, 4 had no
basis to assess the adequacy of the cost estimates because BLM reported
no estimates, and the most recent cost estimates for 4 were prepared
after operations ceased.
[37] Lewistown Montana BLM field office officials told us that BLM
provided additional funds after July 2004.
[38] The Abandoned Mine Land Reclamation Program is authorized by Title
IV of the Surface Mining Control and Reclamation Act of 1977 and
provides funds for reclamation and restoration of land mined and
abandoned or left inadequately restored before August 13, 1977, and for
which there is no continuous reclamation responsibility under state or
other federal laws.
[39] GAO, Bureau of Land Management: Improper Charges Made to Mining
Law Administration Program, GAO-01-356 (Washington, D.C.: Mar. 8,
2001).
[40] Most of this money came from Resource Indemnity Trust Grants,
which are derived from taxes on coal mining in the state.
[41] In this survey, BLM defined timely as within 5 days.
[42] BLM state office officials completed state surveys for those
states within their jurisdiction with hardrock operations--a total of
13 states. The BLM Montana state office said that one state within its
jurisdiction--South Dakota--had only two hardrock operations, both of
which had ceased operating and were being reclaimed by the operators.
[43] BLM Instruction Memorandum 2005-126, Data Standard Changes for
Surface Management Plans of Operations, (Apr. 14, 2005).
[44] BLM Instruction Memorandum 2003-118, 43 C.F.R. 3809 Notice-
Workload Analysis (Mar. 24, 2003).
[45] National Research Council, Hardrock Mining on Federal Lands
(Washington, D.C.: 1999).
[46] We asked each of the BLM state offices with hardrock operations to
what extent the state office or its field offices rely on information
in BLM's LR2000 system for managing the financial assurance program for
hardrock operations. The categories were: little or no extent, some
extent, moderate extent, great extent, and very great extent. The
Alaska BLM state office answered this question for ALIS.
[47] Some of the 12 BLM state offices manage BLM programs in more than
one state. For example, the BLM Montana state office manages BLM
programs in Montana, North Dakota, and South Dakota, and the Oregon
state office manages BLM programs in Oregon and Washington.
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