New World Gold Mine Near Yellowstone:
A Project Abandoned

Marc Humphries
Analyst in Mineral Economics
Environment and Natural Resources Policy Division

Updated August 27, 1996

96-693 ENR

Table of Contents

Summary
Background
Project Abandoned
Property Exchange Agreement

Summary

Crown Butte Resources, Ltd. wanted to develop its New World gold mine deposit located near Yellowstone National Park. The proposed mine was located almost entirely on private property about 3 miles east of the northeast corner of Yellowstone National Park and next to the Absaroka-Beartooth Wilderness area. Pressure was applied at the state, federal and even international level to stop the project. On August 12, 1996, Crown Butte decided to cancel the project and enter into a "property exchange" agreement with the federal government. This report provides some background and details of the agreement by which Crown Butte will abandon the project and turn the property over to the federal government, in return for land which the company can sell to recover the investment made so far in the project.

Background

Crown Butte's New World mine would have produced an estimated 1,800 tons of gold/silver/copper ore per day (500,000 tons annually), valued at nearly $800 million over a 10-15 year period. An ore processing mill, a tailings pond, a waste rock storage site, access roads, a work camp and transmission lines were also planned.

The project stirred controversy because of its possible impacts on Yellowstone National Park and the surrounding area. Environmental groups opposed the project because of the potential for damage to water, recreational assets and wildlife. Crown Butte maintained it would employ "state-of-the-art" technology to contain waste in a proposed 106-acre tailings pond. Opponents of the project feared that the tailings pond might fail in the future due to earthquakes, avalanches or other events, and lead to acid mine drainage.

Most of the site was on leased private land that had previously been mined, which limited regulation of the project at the federal level. However, several permits from federal and especially state authorities would have been required to operate the mine and mill. Other potential barriers, not necessarily prohibitive, included an executive branch proposal to suspend patenting on federal lands surrounding the project, and proposed legislation (H.R. 1846, S. 1737) to halt it permanently. Public opponents to the mine included President Clinton. The United Nations World Heritage Committee, although it had no jurisdiction over the project, declared that it was a threat to Yellowstone Park. (For details on the Crown Butte plan and oposition to it, see CRS Report 96-669-ENR, "New World Gold Mine and Yellowstone National Park," August 6,1996.)

Project Abandoned

Because of permit delays, possible executive or legislative action, and public opposition, the economics of the project began to look less favorable. The broad opposition to the project apparently convinced the company that it could not -- or should not -- be completed.

On August 12, 1996, nearly six years after Crown Butte submitted its operating plan for the mine, its owners suspended permitting activities for the project. The suspension of permitting activity and the property exchange agreement were reached prior to final decisions made at the state and federal levels. A draft Environmental Impact Statement being prepared by the U.S. Forest Service, on whose land the tailings pond was planned, was expected by late summer, but now will not be issued.

Property Exchange Agreement

Under the agreement, the U.S. government would trade other federal lands, yet to be identified but valued at $65 million, for Crown Butte's New World property interests. The company would then sell the land it received to recover the investment made so far in the project. An escrow account of $22.5 million would also be established by Crown Butte to fund ongoing restoration from earlier mining activity. As part of the agreement, Crown Butte would purchase the lands it is leasing, and include those lands in the package transferred to the government. The Forest Service would manage the lands received from Crown Butte.