Government Role and Influence in Mining

Government and their agencies exert many influences on the mining industry. In the United States,
these take the form of various statutes and regulations pertaining to land use, mineral rights, taxation,
quotas, tariffs, financial incentives, antitrust constraints, stockpiling, safety and environment, and
expressed or implied mineral policies.

Laws governing the acquisition of mineral rights in the United States have developed from the common
law of England, the laws and statutes of the federal government, and the laws of the various states.
Although the federal Mining Law of 1872 has been somewhat modified by later legislation, it remains
the recognized and pertinent statute. It provides for the location of claims for mineral deposits located
in the public domain, the performance of annual assessment work to retain rights to a claim, and the
acquisition of titles to claims. Certain nonmetallic minerals such as coal, gas, oil, phosphates, sodium
compounds, and sulfur are exempted from this act and are governed by a leasing law, the Mineral
Leasing Act of 1920. Uranium is subject to a leasing arrangement also, under the Atomic Energy Act of
1954. Many states have also enacted legislation to provide mineral rights within their boundaries.

A mining company is subject to the same forms of taxation upon income as any other business, and in
certain states, to production, royalty, and severance taxes as well (Anon., 1983b). In the federal
corporate income tax law, however, the Internal Revenue Service (IRS) wrote in two provisions that are
advantageous to mining companies. The first is a depletion allowance, similar in effect to a depreciation
charge, that permits a deduction from taxable income in recognition of the gradual exhaustion of ore.
The second allows the deduction of exploration and development cost over a period of time.

Many imported minerals and processed metals are subject to tariff duty. The mineral industry, like
manufacturing, has consistently sought import quotas or tariff protection from foreign producers, and
the US government has generally recognized the importance of encouraging a strong domestic mining
industry, notwithstanding other commerce policies generally supportive of international free trade.

The need for safety and environmental regulation arises because of some of the less favorable impact of
mining. Sometimes these are direct and obvious, but more often they are considered side effects.
Typical impacts include (1) accidents and health hazards, (2) land-use and environmental impacts, (3)
economic-political-social-psychological effects.

Accident and health hazards in mining are vital concern to the industry as well as to regulatory bodies of
the government and the public at large. Mining practices are regulated by individual states and by the
Mine Safety and Health Act of 1977 (Anon., 1984b). While mining’s safety record is among the poorest
of all US industry, due in part to an inherently more dangerous environment, it has improved
significantly since the 1960s. Greater industry diligence, government intervention, and union criticism
are variously credited for the improvement. The consequences of poor health and safety practices in
the industry are costly, both in terms of loss or harm to life and property damage, and mining is
beginning to exercise the initiative required to improve its record (Hansen, 1973).
Physical, chemical, and biological changes in the environment often result from mining. They are usually
the most evident and serious of mining’s side effects. Examples are disturbance of the surface,
subsidence, water and air pollution, consumption of irreplaceable resources, threat to endangered
species, and pre-emptive use of land (Parr and Ely, 1973; Brooks and Williams, 1973; Parr, 1982).
Federal legislation (e.g. the clean water and Clean Air Acts of 1977, the Endangered Species Act of 1973)
now requires the containment or correction of any of these effects that violates environmental
standards. Conflicts over land use increasingly are being resolved in ways that provide for orderly,
multiple use of the land; applicable legislation is contained in the Multiple Surface Use Act of 1955.
Restoration of the surface following coal mining is now required under the Surface Mining Control and
Reclamation Act of 1977.

Finally, there is a variety of indirect effects, often more subtle and less susceptible of measurement, that
may be associated with mining. They are grouped into a third, omnibus category of economic-political-
social-psychological effects (Weinreach and Fagan, 1975). Often they result from either initiation or
termination of mining operations, when drastic changes occur in manpower-employment levels in
nearby communities. The primary effects of opening a mine are largely beneficial, of course, but there
may be deleterious secondary ones that create economic and political strains, require social
readjustments, and cause psychological stress among population. These are multiplied when a mine
closes.

The anticipation of unwanted, indirect consequences is the most important and difficult challenges that
mining confronts in managing its various side effects. Generally, a mining company writes a
comprehensive environmental impact statement (EIS) prior to undertaking a mine development
project. The National Environmental Policy Act stipulates that the EIS must be filed when “federal
action” is involved, that is, approval of a lease permit, right of way, or mining plan (Parr, 1982). In this
way cost/benefit analyses can anticipate mining’s consequences in advance. Older mining operations
face no such restraints, however, and consequently environmental abuses do exist in mined-out areas.

In spite of these direct and important involvements of government, many in the mineral industry rightly
allege that the United States, as a nation, lacks a coherent, definitive mineral policy (Dorr, 1987). Long
advocated by trade associations such as the American Mining Congress (Anon., 1988), a US national
mineral policy in reality exists only in de facto form.

Adapted from SME Handbook’s Introduction, Volume I (Hartman, et al.

UNICA FIMM Library, Nasca, Ica, Peru. 2004)

Explanation of words in bold type

antitrust constraints Restrictions or limitations related to legislation for preventing or
controlling trusts or monopolies, with the intention of promoting competition in business.

stockpiling Verb. Accumulate goods or materials, especially held in reserve for use
at a time of shortage or other emergency. “America would provide a safer form of atomic energy to
prevent the production of a growing stockpile of nuclear weapons material”.
pertinent statute. Applicable regulation to a particular matter. “She asked me a lot about
very pertinent laws”.

leasing law Law about renting property or land

Internal Revenue Service (IRS) USA equivalent to Peru’s SUNAT

depletion allowance The amount of something that is permitted, especially within a set of
regulations or for exhaustion or consumption. “A seventy-five-pound baggage allowance”.

depreciation charge A price asked for goods’ or services’ devaluation. “A fee for reduction of
value.”

notwithstanding Adv. In spite of. “She tells us she is an intellectual; notwithstanding, she
faces the future as unprovided for as a beauty queen”.

side effects Additional but subordinate effects; secondary effects. “The collateral
meanings of a word”.

the public at large The public as a whole; the public in general

union criticism Syndicate’s judgment or evaluation

variously credited for In several or different ways assigned or attributed to (something or

somebody)

pre-emptive use Use of property allowed by right to purchase in advance of or in

preference to others

omnibus category A category comprising several items or aspects.

either initiation or termination Conj. Either: Used before the first of two (or occasionally more)
alternatives that are being specified (the other being introduced by “or”). “Either when something starts
or when it ends”.

deleterious secondary one Something or somebody collaterally damaging or harmful

unwanted Adj. Not or no longer desired. “Affairs can lead to unwanted

pregnancies”.

Environmental Impact Statement (EIS) Environmental Impact Assessment; environmental impact

estimate report or presentation.

Undertake Verb. Commit oneself to and begin (an enterprise or responsibility); take
on. “A firm of builders undertook the construction work”.

right of way The legal right, established by usage or grant, to pass along a specific
route through grounds or property belonging to another.
face no such restraints Do not face limitations of the type previously (or about to be)
mentioned.

mined-out areas Areas from which minerals have been extracted from mines

In spite of Notwithstanding; despite. “She tells us she is an intellectual in spite of

the fact that she faces the future as unprovided for as a beauty queen”.

rightly allege Correctly and properly claim or assert that someone has done
something illegal or wrong, typically without proof that this is the case.
“He rightly alleged that he had been assaulted”.

lack Verb. The state of being without or not having enough of something.
“The case was dismissed for lack of evidence”

de facto Adj. In fact, or in effect, whether by right or not. “The island has been de
facto divided into two countries”.

Exercises:
A. Use these words to complete the following sentences:

direct involvement, federal Mining Law of 1872, gradual exhaustion, mining industry, National
Environmental Policy Act, nearby communities, safety record, secondary effects, tariff duty, use of land

1. The USA government influences the ……………. in the form of regulations pertaining to legislation
for preventing monopolies.
2. The ………………………….. is recognized as the applicable regulation governing the acquisition of
mineral rights in the USA.
3. The USA IRS wrote the provision about the …………. of ore that is advantageous to mining
companies.
4. In the USA, imported minerals and processed metals are subject to …………… to protect and
encourage a strong domestic mining industry.
5. Less favorable impact of mining are obvious, but more often they are considered…………...
6. The USA mining’s ……….. has improved since the 1960s because of government intervention.
7. The …………… allowed by right to purchase in advance of or in preference to others is an evident
serious of mining’s side effect.
8. The category comprising economic, political, social and psychological effects to …………….. is the
third group of indirect effects associated with mining.
9. The USA ………….. stipulates that the EIS must be filed when the legal right to pass along a
specific route through property belonging to another is involved.
10. Despite government’s……………. , many in the mineral industry allege that the USA lacks a
mineral policy.

B. Answer these questions

1. How many government’s statutes and regulations influence the USA mining industry?

2. Where have the USA laws governing the acquisition of mineral rights developed from?

3. What is a depletion allowance for a mining company?

4. Who has sought tariff duties to import of products from foreign mining producers?

5. How many non-favorable impacts of mining are considered side effects?

6. Explain why mining’s safety record is among the poorest of all industry:

7. Give an example of each: a physical, chemical, and biological change in the environment resulting
from mining:

8. What is it multiplied among population when a mine closes?

9. Are older mining operations faced to filing an EIS?

10. Which association alleges about a US national mineral policy in de facto form?