Public Land Sales a Steal Under Old Law, Study Says

WASHINGTON —  An antiquated federal law designed to encourage mining in sparsely populated parts of the West instead is permitting developers to buy vast federal tracts for less than one one-thousandth of their fair market value, the General Accounting Office reported Wednesday.

Entrepreneurs taking advantage of the law paid the government less than $4,000 for land estimated to be worth up to $48 million, GAO auditors revealed in a survey of just 20 of the hundreds of such sales concluded since 1970.

A random sample by the agency of 285 applications still pending before the Interior Department found that in 12 cases alone, the government is preparing to sell land worth up to $47 million for just $16,000, according to the report, unveiled before the House Committee on Interior and Insular Affairs.

The mining law, enacted by Congress in 1872, permitted U.S. citizens to buy patents for most mineral deposits on federal lands for $2.50 an acre, with others priced at $5 an acre.

While the scope of the law recently has been narrowed, it still sets the same low prices for public lands on which buyers can demonstrate that gold, silver and other hard rock minerals can be viably mined.

But the GAO study found that little of the land is actually used for mining and suggested that many tracts--located near profitable ski resorts and casinos--had been bought for speculation. The report urged that the law immediately be amended to prohibit such land sales.

“This is outrageous,” Rep. Nick J. Rahall II (D-W. Va.) declared, endorsing the recommendation. “At $2.50 an acre, these valuable federal lands are being transferred out of public ownership for fast-food hamburger prices.”

The mining law presents the most significant exception in U.S. law to a general rule requiring public lands be sold at fair market value. It originally was enacted to promote settlement in the West and the exploration and development of domestic mineral resources.

The new disclosures about the cost of the law to the federal government add to concerns raised in 1986, when speculators bought 17,000 federal acres for $42,500, then weeks later sold them to major oil companies for $37 million.

In the face of the public outcry that resulted, the Ronald Reagan Administration imposed a moratorium on such sales for lands containing oil shale. But little consideration was given to potential problems raised by sales of land yielding hard rock minerals; such sales never were proscribed.

Meanwhile, the deadline for the Reagan moratorium has expired, leaving hundreds of land-purchase applications again pending for Interior consideration.

Confronted with the evidence in an appearance before the committee, Interior Secretary Manuel Lujan Jr. testified that his department now has “no way of dealing” with the problem.

But he told the committee he had “a lot of sympathy with what the GAO is saying,” and he told reporters later that “maybe it is time to revisit” the 1872 law.

“I am not satisfied with $2.50 an acre,” he said. “We have to look at alternatives.”

Under provisions of the mining law, the federal government in the last 117 years has sold about 3.2 million federal acres--an area about the size of Connecticut.

In its current form, the law allows citizens to prospect for minerals on most federal lands, and, if a valuable deposit is discovered, to buy for a nominal fee a patent giving rights to both the minerals and the land.

The report by the GAO, an investigative agency of Congress, said the potential for the law’s abuse has been raised by “escalating land prices near expanding communities, resort areas and tourist attractions.” Under those conditions, it said, the patent provision has become “an attractive means of acquiring title to valuable land for non-mining purposes,” and has resulted in “patent holders reaping huge profits at the government’s expense.”

The report said, for example, that a 160-acre claim near the Keystone ski resort in Colorado was patented in 1983 for $400. Last year, 44 acres of the claim were offered for sale for $484,000 as part of a real estate development. No mining ever took place.

In another case pending before Interior, investors in 1987 filed a claim for 1,280 acres adjacent to Lake Mead National Recreation Area and within three miles of nine gambling casinos in Laughlin, Nev. The GAO report said that if that claim were approved, the government would receive $3,200 for land valued at between $25.6 million and $35 million.

Warning that the “gap is growing” between nominal prices set by the mining law and the federal land’s true value, the GAO estimated the government stands to lose “tens of millions of dollars” if the mining law is not amended. The agency recommended the government maintain ownership of the lands and lease them to those who would mine them.

That recommendation was strongly endorsed by Dave Albersworth, a spokesman for the National Wildlife Federation, who noted: “This law is a sacred cow, and feeds a Western mythic mentality that believes Gabby Hayes can still go out with a burro and pickax and find a mother lode.”

But Keith Knoblock, a vice president of the American Mining Congress, said in an interview that the trade group would oppose efforts to amend the legislation.

Staff Writer Louis Sahagun in Washington also contributed to this story.