February 16, 2000

The Department of the Interior's Proposed Initiative to Revise and Update Regulations Governing Hardrock Mining Operations

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Proposed Initiative to Revise and Update Regulations Governing Hardrock Mining Operations (43 CFR 3809)

Stated Purpose:

To ensure that environmental impacts and safety hazards are minimized during operations, and that site reclamation is completed once mineral development concludes.

Summary of RSP Comment:

The Department of Interior's economic analysis in support of this proposal cost-benefit analysis reports that annualized costs of the proposal are likely to be twice the annual benefits. Yet, by using creative discounting, it suggests that in present value terms, it is "reasonable to assume that the benefits associated with the proposed regulation are at least equal to the costs." After correcting for the omissions and methodological flaws, we predict the rule would result in net costs ranging from $63.2 million to $378.7 million.

Though the principal motivation for revising the 3809 regulations has been the environmental impacts of large mining operations, most additional regulatory compliance costs would be borne by operations that cover approximately 5 acres. For these sites, reclamation costs are typically less than $10,000, but the proposal would require them to invest $80,000, on average, to conduct an Environmental Assessment. Such assessments offer no incentives for site reclamation, but would discourage exploration, resulting in less US mineral production, lost exports, lost mining jobs, and increased costs for users of US mineral products.

An alternative would be to require financial assurances, perhaps even in excess of expected reclamation requirements. Posting a surety bond entails much smaller expenditure of resources, and also provides a positive incentive to reclaim the site because failure to reclaim the site leaves the surety provider (and therefore the operator) liable for the cleanup. Failure to reclaim the site leads to bond forfeiture, and funding for the agency to complete the reclamation work. This suggests that requiring a reclamation bond (at or above expected cleanup costs) of $20,000 would be a more cost-effective way of promoting responsible mining.