MINING and PUBLIC POLICY in ALASKA Mineral Policy, the Public

MININGAND PUBLIC POLICY IN ALASKA Mineral Policy, the Public Lands and EconomicDevelopment by Arlan R. Tussing and Gregg K. Erickson prepared for Office of Regional DevelopmentPlanning U. S. Department of Commerce Washington, D. C. and Federal Field Committeefor DevelopmentPlanning in Alaska Anchorage, Alaska prepared by Institute of Social, Economicand GovernmentResearch University of Alaska College, Alaska SEGReport No. 21 June 1969 This report was prepared under contract with the Office of Regional DevelopmentPlanning. The statements, findings, conclusions, recom mendations, and other data in this report do not necessarily reflect the views of the Office of Regional EconomicDevelopment. $5 FOREWORD The report by Arlon R. Tussing and Gregg K. Erickson, Mining and Publia Poliay in Alaska, is muchmore than its brief title indicates. It is the careful formulation of a philosophy of natural resource managementwhose implications are relevant to other industries than mining and other places than Alaska. Without dwelling on "mistakes" i the 1 48 i nati affluence and changing institutions are altering the socially most desirable uses of land, minerals, and other resources. Tussing and Erickson point out that Alaska1 s present lack of economic development presents special opportunities there to make the institutions of natural resource managementresponsive to twentieth century needs, without the entanglements of vested rights which stand in the way of mining and land law reform in the older states. They find that the State of Alaska has grasped these opportunities, perhaps inconsistently, but that federal laws and institutions do not now add up to a sound program of resource development and conservation. The report presents the principles and many of the specific elements of such a managementprogram. The Federal Field Committeefor DevelopmentPlanning in Alaska originally sponsored a study of Alaska mineral policy at the University of Alaska to assist the deliberations of the Public Land Law Review Commission. I believe that this report will be exceptionally helpful to the Commissionin structuring its thinking about Alaska. It should, however, be brought to the attention of all those concerned with natural resource policy in both the federal and state governments. I personally found most of the arguments presented in Mining and Publia Poliay in Alaska very persuasive, but few readers will agree with all its premises or all its conclusions. At the time this report is released, I shall have left federal service; my strong recommendationof it should not be construed as an official endorsement of the authors• recommendationsby the Federal Field Committeefor DevelopmentPlanning in Alaska or by the federal government generally. Joseph H. FitzGerald, Chairman Federal Field Committeefor DevelopmentPlanning in Alaska Anchorage, Alaska Apri1 29, 1969 iii AUTHORS'PREFACE, SUMMARY OF RECOMMENDATIONS, ANDACKNOWLEDGEMENTS This report examines the relationship of Alaska's natural endowmentof minerals to the national interest, as well as the role minerals can and should play in Alaska's economic development. It attempts to define the paramount objectives of the federal and state governments in mineral development and public lands administration, and to take a broad look at the economics of the mineral industries and the private and governmental institutions which make up the system of mineral development in the United States and Alaska. The study was originally designated "Alaska Mineral Policy and Legal Analysis'' and was intended primarily as an examination of existing mining law and a consideration of specific legal reforms designed to encourage mining within the state. This limited purpose seemed well served, however, by Charles F. Herbert's A Summary Comparison of Mining Laws and Oil and Gas Laws and Practices with Recommendations for Policy [1967]. What had not been done was a critical study of government objectives in mineral policy, and an economic analysis of the institutions affecting or affected by the mineral industry. Sometreatment of these matters seemed a necessary precondition to further consideration of legal innovations. Neither the analyses nor the conclusions of this report are unconventional amongeconomists or amongnatural resource authorities; the most we can claim for their originality is that they have not all been combined in one place and that they may not have been applied with special reference to Alaska. They do occa sionally conflict, however, with some of the popular wisdomwithin the mining industry and within Alaska, and also conflict sharply with the development strategy implicit in the federal mining and public land laws. On the other hand, we have been surprised and pleased by the degree to which Alaska state mining law and public lands adminis tration have anticipated the conclusions of this report at least in spirit, limited as the scope of state jurisdiction has been in a state where 95 percent of the land remains in federal hands. V Each successive draft of this report has been shorter than its predecessor, so that what remains is an extremely concentrated treatment of the subject. The exposition has probably been streng thened by the omission of theoretical excercises in economics, statistics, and geology that make up the reasoning behind some of the conclusions. While we have attempted to provide adequate documen tation or other support for each statement in the text, the report is already very close to a "summaryof conclusions and recommendations." It ts difficult to condense our findings further without omi something important. Nevertheless, a list of the propositions emphasized in the text may give the reader a representative overview of the report. Three individual statements which may summarizethe operationally most important conclusions are: (1) Land and mineral policy should be in the hands of the state except where earamount national interests can be demonstrated [p. 21J. (2) The merits of competitive leasing, as a general principle for the development of minerals on Alaska public lands, are overwhelming, and ... the objectives whose pursuit might favor the choice of another system can be met effectively within the frameworkof the leasing system [p. 57]. (3) Acquisition and publication of regional geologic information are likely to have an effect on private exploration expenditures out of proportion to1he public costs involved, because of the crucial role it plays in shaping the expectations held by a mineral explorer about what he will find and howmuch it will be worth [p. 82]. Someof the other statements emphasized in the text are, in the order of their appearance: (4) [The principle of national economic efficiency] supplies a straightforward general standard to determine whether a particular mineral development in Alaska is in the national interest: Is it profitable? [p. 4.] (5) The present ignorance of Alaska's geological endowment [limits] the range of policy choices available to attain any given level of insurance against shortages of strategic commodities, and thereby increases the cost of obtaining that level of security [p. 10]. vi (6) Revenuemaximization and market pr1c1ng of natural resource commodities should not be regarded as inviolable absolutes, but they should be an important policy norm. Legislators and public administrators ought to be as jealous of the potential revenues from the natural resource assets under their custody as they are of moneysactually collected from the taxpayers [p. 12]. (7) If we regard commercial and noncommercialresources use as mutually competitive, the socially optimum boundary between the two must continually shift in the direction of greater noncommercial--aesthetic and recreational--uses [p. 15]. (8) For muchof Alaska's territory, the requirements for realization of its potential scenic or recreational values will be the same as for commercial development: knowledgeand accessibility [p. 16]. (9) So long as [the mineral resources of the federal lands in Alaska are not managedto earn revenues for the federal government], there is no valid public reason for the existence, with reference to the unreserved lands, of any federal mining or mineral leasing law. Indeed, for the vast majority of land and resource uses, state managementought to be socially more rational and more effective, even from a national standpoint, than federal management[pp. 20-21]. (10) This study recommends... an authoritative joint land planning commissioncreated by Congress and the State Legislature which would systematically and simultaneously classify the public lands of Alaska, both state and federal; complete the federal "preserva tion" system; and select those lands to be transferred to the state [p. 23]. (11) Broadly speaking, it is likely that Alaska's mineral resources are comparable to what might be found in an . equal area in the coterminous 48 states [p. 30]. (12) [The mineral] industries are, by almost any standard, in a nationwide decline [p. 31]. vii (13) Federal and state governments should be prepared to examine substantial changes in mining law, tax policies, etc., even if they seem completely unpalatable to mining industry spokesmen. In considering objections to proposed reforms in Alaska, sight should not be lost of the fact that mineral production [except for oil and gas] under the present regime is approximately zero [p. 38]. (14) The existing exploration, mining and mining-smel ining irms are by no means the only source of capital and enterprise for the

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