From U.S. Department of Interior

To: Greg Etter, Vice President and General Counsel for BMG

Re: Crown Jewel Mine, Okanogan County, Washington

Dear Mr. Etter:

We are writing to advise you that the United States Bureau of Land Management (BLM and the United States Forest Service (USFS) are unable to approve the proposed Plan of Operations (Plan) for the Crown Jewel Mine, Okanogan County, Washington, because the Plan does not comply with the requirements of the Mining Law of 1872.

Battle Mountain Gold Company (BMG) proposes to develop fifteen lode mining claims, four patented and eleven unpatented, Under the Plan, BMG proposes to use 117 unpatented mill sites, covering approximately 555 acres, for ancillary facilities such as buildings, tailings piles, waste rock dumps, soils and ore stockpiles, and sediment traps. Fourty-six of these mill sites are on public lands administered by BLM and 71 mill sites are on lands administered by USFS.

The Mining Law allows claimants to locate up to five acres of non mineral land for mill site use in association with each valid mining claim. Any mill site acreage in excess of five acres per mining claim is not valid. No rights of any kind attach to invalid mining claim or mill sites. Under the Mining Law, BLM may locate a maximum of 75 mill site acres, depending on whether all of the fifteen lode claims in the Plan are valid. Based on the information in the Plan, the Crown Jewel Mine exceeds the allowable amount of mill sites by at least 490 acres.

BMG also proposes to site some surface facilities, including waste rock dumps, soil stockpiles, and sediment traps, on 22 unpatented lode claims that it does not intend to mine. While the Mining Law does permit the use of a valid lode claim for facilities that are ancillary to mining on that claim, it does not permit use of lode claim for facilities to support mining solely on other lode claims. For this reason, the lode claims BMG has identified for mill site use likely are invalid. Moreover, BMG may not relocate these lode claims as mill sites since the Crown Jewel Mine has already exceeded the allowable acreage of mill sites.

We emphasize that there are ways for BMG to still proceed with developing the Crown Jewel Mine consistent with the mill site limitation. On both National Forest and BLM administered lands, BMG could seek land exchanges, provided the federal agencies determine that an exchange would be in the public interest. BLM has also indicated that the use of excess mill sites acreage on BLM land could be authorized through approval of a plan of operations under 43 CFR 3809. 1-6, if the lands are still open to the location under the Mining Law. Alternatively, BLM is examining the extent to which it may authorize such use through a lease under Section 302(b) of FLPMA and BLM's implementing regulations at 43 CFR 2920. Because BLM is currently revising the surface use authorization issue, if BMG wishes to seek surface authorization, BMG should consult with BLM foe a final determination of the proper authority under which to seek such authorization.

On National Forest System lands, use of lands in excess of what the Mining Law provides may not be authorized by means of a plan of operations issued pursuant to 36 CFR 228, Subpart A. Those regulations govern only operations authorized by the U.S. mining law, which confer a statutory right to enter upon the public lands in search for minerals. Such use may be authorized by a special use authorization under 36 CFR Part 251, Subpart B and the authorities cited therein.However, recent amendments to those regulations prohibit the issuance of special use authorization for certain uses of National Forest Lands. 63 Fed Reg. 65,950-69 (1968). In particular, issuance of a special use authorization for disposal of solid waste or hazardous substance is barred.

When our attorneys met with you and other BMG representatives on March 3, BMG stated that, for equitable reasons, the Department of the Interior should not require the Plan to comply with the millsite requirements of the Mining Law as explained in that the Solicitor's November, 1997, opinion. In particular, BMG argued against enforcement of the mining Law on projects, such as the Crown Jewel Mine, for which a Record of Decision (ROD) had been prepared at the time that opinion was signed. BMG restated this position in its March 9, 1999, letter to BLM State Director and the USFS Forest Supervisor, including its contention that application of the millsite limitation to the Crown Jewel Mine would not be in "keeping with the Interior Department's practice of providing for a reasonable transition in situations where principles of fairness and reliance are involved.

After careful and thorough consideration of your arguments, we believe that it is appropriate to apply the mill site limitation to this project for two reasons. First, we have no authority to enlarge the rights granted under the Mining Law; that power is reserved to Congress. Second, the mill site limitation is not, as BMG's March 9 letter argues, comparable to the proposed part 3809 regulations, which contains substantive change in the requirements for mining operations that would justify a transition period. As the Solicitor's Opinion notes, the limitation on mill sites in the Mining Law have been widely appreciated by mining industry lawyers for decades. Adherence to the Mining Law limitation on allowable mill site acreage by all mining claimants thus should not thwart any legitimately-held expectations.

BMG also stated that, because BLM and USFS have signed the ROD for the Crown Jewel Mine, the agencies are barred from applying the mill site limitation. We disagree. Nothing in the ROD vests any right in BMG. The ROD did not purport to make any determination as to whether BMG has established valid rights under the Mining Law; it simply selected a preferred alternative. The ROD stated at page 11:

Approval of the Selected Alternative will not now, nor in the future, serve as a determination of ownership or validity of any mining claim to which it may relate, and this Record of Decision does not give the claim owner or operator any rights they are not otherwise entitled to by law.

Selection of the perfered alternative in the Crown Jewel Mine environmental analysis rests on the premise that BMG had unpatented mining claims and mill sites that the government could later challenge. The ROD by its very terms addressed only the selection of an alternative for National Environmental Policy Act purposes. The ROD is clear that its selection of an alternative is valid only insofar as the unpatented mining and mill sites are valid. To the extent that BMG has not established rights under the Mining Law, the ROD did not create such rights or exempt BMG from complying with the law. The recent court decision rejecting the challenge to the adequacy of the Crown Jewel Mine's final EIS does not change this result.

We understand your concern that these issues are being raised relatively late in the process of considering your plan of operations. Nevertheless, the limitations the Mining Law places on mining claims and mill sites have long been understood. In these circumstances we have no choice but to enforce the law. Therefore, we hereby vacate the Crown Jewel Mine Record of Decision and cannot approve your proposed plan of operations at this time. This decision constitutes a final agency decision not subject to further administrative review.

Signed by;

James R. Lyons, Under Secretary,

Natural Resources and Environment, Department of Agriculture

Sylvia Baca, Acting Assistant Secretary,

Land and Minerals Management, Department of the Interior

Charles R. Rawls, General Counsel, Department of Agriculture

John D. Leshy, Solicitor, Department of the Interior