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HomeMy WebLinkAbout81-135 041-080-027 (2)NORTH CONTINENT LAND & 'TEVIBER, INC. January 30, 2008 VIA EMA[L &COURIER Tim Snellings, Director Butte .County Department of Development Services 7 County Center Drive Oroville, CA 95965 Re: Operations History of the New Era Mine, Mining and Reclamation Permit No. 8.1-135: CA Mine ID# 91-04-0031 Dear Mr. Snellings: We are -writing you in response to inquiries that, have been made of us by the Butte County Department of Development Services ("DDS7.)'.concemmg the.historical. operations, of the placer mining. operation located at 4095 DryCreek Road, Oroville, California 95965,- on the .west side of Dry Creek Road, approximately.three miles north of. Messina Valley Road, south of the City of Paradise, California, on the property described as Butte County -.Assessor's Parcel Numbers 041=080=027 aud.41-08-27, encompassing approximately 'eighteen (18) acres of surface land and the full mineral interests thereon and thereunderowned in fee simple by Ronald R. Logan and Betty J. Logan, identified as California Mine Identification Number 91=04-0031,- and': permitted for operation -under Butte County Mining and Reclamation Permit No. 81-135 (the "Permit") (collectively referred to herein as the "New Era Mine!). Accordingly, this letter and its exhibits provide an explanation.of the nature of the New Era Mine placer mining operations in light of the applicable county, state, and federal legal standards governing such operations, as well as certain catalogued evidence in support of this explanation. In order to preserve this letter and each exhibit hereto we respectfully request that .each such item be recorded in the official files at DDS concerning the New Era Mine. Discussion of Laws and Regulatory Guidance Applicable to Placer ming .Operations The Butte County Code The Permit states that the New Era Mine was permitted as a "placer gold mine" "pursuant to the provisions of Chapter 13 of the Butte County Code" ("BCC") on July 9, 4950 Cohasset Road • Suite 1.0 • Chico, California • 95973 Page I of 8 281 • NORTH CONTINENT LAND & TIMER, INC.. 1982. Chapter 13, Grading and mining, of the BCC contains two provisions relating to the status of mining operations. Section 13-108 of the BCC prescribes the commencement of "surface mining operations within five (5) years from the date of issuance of the permit," and Section. 13-109 of the BCC prescribes the treatment of a "surface mining operation" that becomes "idle". The Permit commenced prior to the enactment of current Chapter 13 of the BCC; however, the New Era Mine has been subject to Section 13-102 of the BCC since its enactment. Section 13-102 of the: BCC states: "Idle mine: `Idle' means to curtail for a period of one year or more surface -mining. operations by more. thanninety(90) _percent of the operation's previous maximum annual mineral production,. with the intent to. resume' those..surface mining operations at a future date." Section 13-102 of the BCGstates: "`Surface mining operations' means all,.or any part of, the process involved in the mining of mineralst -on mined lands- by removing overburden3 and mining directly from the mineral deposits, open -pit mining of. minerals 'naturally exposed; mining by the auger method, dredging and quarrying, borrow pitting, stream bed strimming, :and segregation:or stock -piling of:mined=materials (and recovery of the same), or surface - work °incident 'to an underground mine. Surface mining operations shall include, but are not limited to: (a) In-place distillation ;=retorting or leaching. (b) The pioduction and disposal of mining waste., (c) Prospecting and exploratory activities."5 ' Section 13-102 of the.BCC states: "`Minerals' means any naturally occurring chemical. element or compound, or groups of elements and compounds, formed from inorganic processes and organic substances, including, but not limited•to, sand,':gmvel, aggregate, coal, peat.and.bituminous rock, but excluding geothermal resources, natural gas and petroleum." 2 Section 13-102 of the BCC states: "'Mined.linds' includes the surface, subsurface and ground water of an area in which surface mining operations will be, are being, or have been conducted, including private ways and roads appurtenant to any -such area, land excavations, working; mining waste, and areas in which structures, facilities, equipment, machines, tools, or other materials or property which result from, or are used in, surface mining operations, are located" 3 Section 13-102 of the BCC states: "`Overburden' means soil, rock or other materials that lie above a natural mineral deposit or in between deposits, before or after their removal by surface mining operations." ° Section 13-102 of the BCC states: "`Mining waste' includes the residual of soil, rock, mineral, liquid, vegetation, equipment, machines, tools or other materials or property directly resulting from, or displaced by, surface mining operations." 5 Section 13-102 of the BCC :of or `prospecting' means the search for minerals by geological, geophysical, geocheWcal or other techniques, including, but not limited to, sampling, assaying, drilling, or any surface or underground works needed to determine the type, extent or quality of the minerals present" f 4950 Cohasset Road - Suite 10 - Chico, California • 95973 Q Page 2 of'S 2 8 2 (. • NORTH CONTINENT LAND & TIlVIBER, INC. As of the date of this letter, each of the aforementioned Sections contained in Article II, Chapter 13, of the BCC have .remained current, as codified, pursuant to Ordinance Number 3083, § 2, adopted August 8, 1993 ("Ord. 3083"). Prior thereto, Chapter 13 was based upon § 1 of Ordinance Number 1827, adopted Ma� 24, 1977, and §§ 1--4, 6, and 7 of Ordinance Number 2003, adopted February 13, 1979. DDS has indicated on prior occasions that certain provisions of Chapter 24 of the BCC, as it existed on the date the Permit was issued, were applicable to the New Era Mine. However, the Minutes of the March 3, 1982 meeting of the BCPC stated: "Commissioner Schrader inquired whether Fish and Game did not have the final. decision in this matter rather than the Planning Commission or the Board of Supervisors. Counsel replied that the State Mining Act requires that a mining Permit be issued by the County— . although. there is no requirement .for a use permit pursuant to the zoning code." This position is in accordance with Section 13-4; Permit and Reclamation Plan .Requirement, contained in the version of Chapter 1f'3 othe BCC that we believe was current on -the date . the Permit was issued. Section 13-4 then in effect did not contain any requirement for a use permit. pursuant to -Chapter 24 of the BCC or any other authority—instead it required . only a permit to mine and an approved- reclamation plan.' Therefore; Chapter 24 of the BCC, as: it existed on the date the Permit was issued and as of the date of this letter, 'did not and does not apply to the New Era Mine. The California Code Section 13-101, Purpose and intent, of the BCC states: "(a) The purpose of this article is to implement the provisions of the California Surface, Mining And Reclamation Act of 1975 as amended (the "Act,"Public Resources Code section 271:0 et seq.)." The relevant provisions of the BCC cited above reflect the corresponding provisions of the Act virtually verbatim; however, as mentioned above, such provisions of the BCC were not enacted until August 10, 1993. Therefore, to the extent that the BCC had not yet enacted its corresponding provisions or that the then -enacted provisions of the BCC were inconsistent with the Act, the Act was controlling. Section 2727.1 of the California Public Resource Code ("PRC") states: "`Idle' means to curtail for a period of one year or more surface mining operations by more than 90 percent of the operation`s previous maximum annual mineral production, with the intent to resume those surface mining operations at a future date." 6 Editor's Notes to Chapter 13 of the BCC. Conversely, Section 13-104 of the BCC, enacted by Ord. 3083, states that a person who "proposes to engage in surface mining operations ... shall submit an application for a mining permit, reclamation plan and a use permit if the zone requires ...... Nevertheless, even if current Section 13-104 were . , applicable when the Permit was issued, a use permit would not have been required for the New Era Mine, as legal counsel to the BCPC acknowledged. In addition, the sections of Chapter 24 pertaining to use permits that have been cited to us previously by DDS have been repealed and do not apply. • 4950 Cohasset Road • Suite 10 - Chico, California - 95973 Page 3 of 8 28-3 NORTH CONTINENT LAND & TIMER, INC. Section 2735 of the PRC states: "`Surface minin8g operations' means all, or any part of; the process involved. in the mining of minerals on mined lands9 by removing overburden)6 and mining directly from the mineral deposits, open -pit mining of minerals naturally exposed, mining by the auger method, dredging and quarrying, or.surface work incident to an underground mine. Surface mining operations shall include, but are not limited to: (a) Inplace distillation or retorting or leaching. (b) The production and disposal of mining waste.11 ; (c) Prospecting and exploratory, activities."12 The State Mining and Geology Board has issued guidance regarding the interpretation of the !aforementioned provisions of the Act and the PRC, which states: "Surface mining operations include; but are not limited to, in-place distillation or retorting or leaching;. the .production and disposal of mining waste, prospecting and exploratory activities, borrow pitting, streambed skimming, and segregation and stockpiling of minedi:materials. (and recovery of same). Surface mining operations are "active" if engaged in any of these activities on a continuous or intermittent basis; so long-, as interruptions in.mining activities do not exceed one year. Reference:.SMARA Section t, 2735 and California Code of Regulations Section.3501 „ts We are not aware.of any written guidance issued by any Butte' County authority that contradicts the aforementioned guidance, and we understand that any law that would 8 Section 2005 of the PRC states: "'Minerals' means any naturally occurring chemical element or compound, or groups of elements and compounds, formed from inorganic processes and organic substances, including, but not limited to, coal; peat, and bituminous rock, but excluding geothermal resources, natural gas, and petroleum." Section 2729 of the PRC states: "'Mined lands' includes the surface, subsurface, and ground water of an area in which surface mining operations will be, are being, or have been conducted, including private ways and roads appurtenant to any such area, land excavations, workings, mining waste, and areas in which structures, facilities, equipment, machines, tools; or other materials or property which result from, or are used in, surface mining operations are located." 10 Section 2732 of the PRC states: "'Overburden' means soil, rock, or other materials that lie above a natural mineral deposit or in between mineral deposits, before or after their removal by surface mining operations" 1 Section 2730 of the PRC states:. "'Mining waste' includes the residual of soil, rock, mineral, liquid, vegetation, equipment, machines, tools, or other materials or property directly resulting from, or displaced by, surface mining operations." 12 Section 2007 of the PRC states: "'Exploration' or'prospecting' means the search for minerals by geological, geophysical, geochemical or other techniques, including, but not limited to, sampling, assaying, drilling, or any surface or underground works needed to determine the type, extent, or quantity of minerals Present." ' Excerpt from Principles for Addressing Idle Mining Operations Under the Surface Mining & Reclamation Act, State Mining and Geology Board. • 4950 Cobasset Road • Suite 10 • Chico, California • 95973 Page 4of8 284 1 ` . NORTH CONTINENT LAND & TIAMER, INC. have the effect of undermining the Act would be voidable. Moreover, we are not aware of any mining regulation that mandates any. concept of "continuous" operation upon penalty of revocation of a surface mining permit. On the contrary, to impose such a law or policy would, in many cases, require contradicting or superseding the aforementioned provisions of the BCC and PRC, since the effect of any cessation of a mining operation for one year or more under those provisions merely has the effect of rendering a surface mining operation "idle" by operation of law. It is difficult to conceive of more inclusive or flexible language than that which defines "surface mining operations" under the BCC and PRC. Further examples of this broad concept of what constitutes being engaged in mining operations are found within the definitions of the terms used in the definition. of "surface mining operations". For instance, the terms "exploration" and "prospecting'.' are defined to include "sampling" or "any surface or underground works needed to determine the type; extent, or quantity of minerals present." In addition, it is extremely difficult to quantify this activity and there is no authority that places the burden of doing so on the operator of any surface mining operation. ..Provided that any such operations are undertaken within any one-year period, surface:mining operations are ongoing. In other words, interruptions in operations lasting less than one-year do not negate the existence of active surface mining operations under the BCC or PRC. • Internal Revenue Service Guidance r. In making inquiries about the historical operations of the New Era Mine, DDS has specifically. asked for information concerning the federal income taxation of the mining operations. The U.S. Department of Treasury, Internal Revenue Service ("IRS"), issued through its Market Segment Specialization Program a manual entitled Placer Mining Industry, Training 3147-121 (7-99), that directly addresses the taxation of placer mining operations (the "Manual") -14 Consistent with our prior responses to DDS, the Manual indicates that the types of tax information that DDS has requested are not typically created or retained by the operators of placer nines. The introductory paragraph of the Manual states: "Major. operators produce the bulk of gold recovered and refined, but small-scale, independent miners make up the majority of the returns filed. Mining has historically been acash- based activity. Often the miner will have little, if any, documentation to support the activity. If there are records, they are often disorganized. Hand-written receipts are common.s15 In addition, the Manual states that, unlike mining operations on public lands, "[f)ilings [of Annual Affidavits of Labor] are not required if the land is privately 14 The Manual is available on-line at: litti)://ww%v.irs.eov/pub/irs-nlssn/nlacerpdf.. 13 Manual, Chapter 1 --Introduction, Page 1-1. 4950 Cohasset Road - Suite 10 - Chico, California - 95973 Page 5 of 8 285 NORTH CONTINENT LAND & TBOER, INC. held: '16 ` Therefore, while DDS has indicated that such federal taxation information would be helpful in its determination of whether the New Era Mine has been active since the Permit was issued, it is important to note that the agency responsible for auditing such information, the IRS, does not, as a matter of routine practice, expect such information to exist.despite the existence of an active placer mining operation. The Manual states that "Where is no one inclusive definition of mining' for federal income tax purposes 1917 and provides examples of how to determine the type and stage of a mining operation. For example, the Manual states that "[s]ome activities associated- with placer mining exploration include staking the claim, removal of property line obstructions, limited removal of overburden (the removal of.. large amounts of overburden would indicate that a deposit may have already been found and the mine may be in a different stage), and limited sluicing. 18 'The Manualalso indicates that it is not necessary for such activities to take place throughout an entire year, stating that "the mining season. varies and can be relatively - short. Only larger operators will have the equipment and resources to work through the winter." 19 Furthermore; the Manual acknowledges the potential::passage.of time between development and removal of ore, stating: "Pre -stripping is a process found in open pit and strip mines. The -process, involves the removal of top soil or earth to expose a coal or ore deposit for later mining. The actual ore may not be removed until the next year after • the covering layer of earth is removed or strippedaway.V,20 awn ::20 Concerning the issue of an operator's income, the Manual states: "There should be. very little, if any, income .during [the exploration and development] period[s]. Activities associated with development are buildin roads, clearing the land, and other or the production stage." 1 "It is not uncommon for miners to activities to prepare a site f deal strictly in cash. If there are indications that the taxpayer is hoarding gold and selling it only as needed, it becomes difficult to determine income through the analysis of bank records."22 . Similarly, "It is often 'the case that an owner will pay for labor in gold.s23 Therefore, the IRS also has determined that income and bank records may not be' appropriate sources of information to determine the extent'of placer mining operations. Nevertheless, the IRS acknowledges in the Manual that expenses associated with placer mining activities where little or no income is reported does not prohibit an operator 16 Manual, Chapter 1 -Introduction, Page 1-4. 17 Manual,, Chapter 1—Introduction, Page 1-1. 18 Manual, Chapter I—Introduction, Page 1-1 19 Manual, Chapter 1—Introduction, Page 1-4. 20 Manual, Chapter 1—Introduction, Page 1-4. 21 Manual, Chapter 1—Introduction, Page 1-4. n Manual, Chapter 2—Mining Income, Page 2-2. 23 Manual, Chapter 2—Mining Income, Page 2-2. •7 4950 Cohasset Road - Suite 10 - Chico, California - 95973 Page 6of8 286 NORTH CONTINENT LAND & TIlVIBER, INC. from claiming expenses incident to such mining activities. The Manual states: "Prospecting activities are generally considered a form of exploration so the associated expenses may be allowable under IRC section 617. Normally, state or federalreporting is not completed for general prospecting. The contention that there can be no exploration expenses because there are no documents filed cannot be used as a reason to disallow the expenses. Exploration expenditures as defined by IRC section 617 include amounts paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of a mineral deposit, and paid or incurred prior to the development stage of the mining. operation. Prospecting expenditures constitute capital expenditures which increase the basis of the mineral property to the same extent as exploration expenditures._ However, Treas. Reg.: section 1.617-1(c)(1) rants the taxpayer a right -to make an election to currently deduct the expenditures." 2 In light of the aforementioned routine ,guidance by the .iRS on placer:mining operations, .we do not believe that any negative . inference. may Abe drawn from *federal taxation information concerning Mr. -or Mrs. Logan or the New Era Mine as regards the historical existence of active placer mining operations since the issuance of the Permit. Factual Background Concerning the Historical Operation of the New Era Mine The New. Era Mine . has been an active placer mining operation since prior to 1981. Mr. and Mrs. Logan were issued a .Permit by the BCPC to operate the New Era Mine on July 9, 1982. On that date and through July 17, 1990, Mr. and Mrs. Logan, themselves and through their agents, operated the New Era Mine. On July 17, 1990, a California limited partnership, New Era Mines LP, was formed 'by Mr. and Mrs. Logan and certain third parties, and the operations of 'the New Era Mine were undertaken by such limited partnership. New Era Mines LP was subsequently terminated in 1990 and the. New Era Mine was again operated by Mr. and Mrs. Logan, and their agents until March 9; 2007. 'On March 9, 2007, North Continent Land & Timber Inc. entered into an agreement with Mr. and Mrs. Logan to be sub -operators of the New Era Mine and operated the mine from such date through December 5, 2007. The operation of the New Era Mine has been open and obvious and pursuant to proper authorization of Butte County and certain California State authorities. Accordingly, the operations of the New Era Mine since 1981 and prior thereto have been formally filed, recorded, and documented, observed and photographed, and the subject of public conversation and media coverage. Evidence of the occurrence of these events during every year from 1981 to the date of this letter is attached hereto in chronologically organized files, each of which corresponds to a year of operation of the New Era Mine: This evidence includes, but is not limited to, affidavits of individuals who witnessed the 24 Manual, Chapter 3—Prospecting Activities, Page 3-1. 4950 Cohasset Road • suite 10 • Chico, California • 95973 Page 7 of 8 287 NORTH CONTINENT LAND & TUVIBIER, INC. operation of' the New Era Mine, affidavits of'vendors to the New Era Mme, photographs depicting the operation of the New Era Mine, and press clippings publicizing the operation of the New Era Mine. This evidencealso demonstrates that the New Era Mine has operated in various stages, such as prospecting; exploration,. development, and production; which have fluctuated in their level of activity according to, among other things, the market. price of gold (the principal ore produced by the New Era Mine), seasonal weather events, and equipment and labor availability. Conclusions and Requests In light. of the legal standards applicable to active .placer mining operations in Butte County and the State of California and the voluminous evidence of yearly operation of the New Era Mine previously . submitted. to DDS . and. enclosed herewith, we are confident that DDS will conclude as..we have that the New Era Mine has been actively mined since .prior to the -date the Permitwas•issued. If DDS has any questions concerning the contents of this letter or any enclosures or the relationship of.any such contents to the_ active placer mining operations undertaken at the New Era Mine since'the. .-:date the 'Permit -was issued, ,please do not hesitate to contact us. In addition, we. hereby request that this letter and its enclosures be recorded and included in the official files maintained by DDS for the Permit and the New Era Mine. Cc: . Frank Noland Ronald R. Logan Enclosures Respectfully submi ed, F.L. Ogle, As authorized agent for Ronald R Logan, As authorized agent for Betty J. Logan, As authorized agent, for North Continent Land & Timber, Inc'.,- 4950 nc.,- 4950 Cobasset Road ^ Suite 10 • Chico, California . 95973 Page 8 of 8