Risk of abandonment of claims continues

About 26 months ago, the Alaska Department of Natural Resources announced its intention to modify the regulations concerning the location of mining claims on state land. The process of amending regulations is a clumsy one at best, complicated by substantial considerations of public interest, judicial interpretations and stakeholder concerns.

Mining is the second largest industry in Alaska, and the vast bulk of mining interests are on state land. Furthermore, the potential for growth of the mining industry over time is limitless. Every new mine that opens in the state means revenue to the state through taxes, rents and royalties and jobs, often in remote locations that lack better alternatives.

In Alaska, modern mining is a safe and environmentally friendly business, and when the mining is complete, the legacy is often permanent infrastructure as well as enhanced access to recreational opportunities.

It is a given that the Alaska mining regulations are in need of an upgrade. What is frustrating is that so little progress has been made over the past two years. Although drafts have been circulated and comments have been solicited and submitted, so far there apparently is no meeting of the minds.

In the meantime, the pages of the unforgiving calendar continue to turn and the Mining Year that ends at 12 noon on Sept. 1, 2018 approaches. On that date, annual labor must be complete, affidavits attesting to the work must be prepared, annual rent comes due and the cycle is reset.

The department had expressed an intent to have at least some of the known problems resolved by Sept.1, however, that determination has now been withdrawn, presumably in favor of a more comprehensive solution later.

Two of the more pervasive problems awaiting correction relate to the qualification requirements to the exposure that claimholders have to declarations of abandonment. In each case there is a risk that an investment, sometimes running to the millions of dollars, can be lost if the claimholder ceases, no matter how innocently, to be qualified to hold state claims or if he or she makes the slightest mistake on a filed document.

These issues have been extensively laid out to the department and numerous proposals for remediation have been identified, all for naught. Without aspersing the well-intentioned bureaucracy, the cost to the industry – and the unwillingness of multinational companies to invest in Alaska – continues to take its toll. Our minerals will remain in place and development dollars will go elsewhere.

Of these two major problems the risk of abandonment seems somewhat more crucial. Under the current interpretation, if an affidavit does not correctly recite all of the “essential facts” and is recorded, the claims are irredeemably lost at the moment of recordation. By extension, if the error was contained in an affidavit recorded in the past, the affected claim(s) are deemed to have been abandoned, perhaps many years ago, the ground is open to mineral entry by third parties and any operations thereon may be in trespass.

This crippling result could be avoided in any number of ways. The simplest way would be for the Legislature to amend AS 38.05.265 to eliminate the one sentence upon which the department relies for its interpretation, pursuant to the guidance of the Alaska Supreme Court.

Or the regulations could be simply amended to redefine the “essential facts” through the judicious use of the word “or”. For instance, in identifying a claim referred to in an affidavit, it doesn’t have to include the name of the claim “and” the ADL number. All that might be required is the name of the claim “or” the ADL number, in which case, an error in one would be adequately compensated for by getting the other right. Miners often include the claim name as well as the ADL number on their affidavits, so this would not constitute a substantial change in the common practice.

Such strategic changes could be accomplished quickly and easily, but unfortunately the window for doing so this mining year has probably closed.

There is one other tool available to Alaska claimholders. AS 38.05.205(c) says, in pertinent part that “[a] valid mining claim, located under AS 38.05.195, may be converted to a lease at any time upon application by the owner, and issuance by the commissioner.” Claimholders, who have any doubts about the provenance of their claims under the current Draconian standard, may wish to consider converting to an upland mining lease to preserve their holdings.

Ultimately, the failure of the department to implement some kind of fix exposes claimholders to a substantial risk of loss.