Bush Administration would consider hardrock royalty on public lands
In the latest round of talks on possible changes to the US Mining Law, the Bush Administration has intimated it is prepared to work with Congress on reform, including the possible imposition of royalties.
Posted: Friday , 25 Jan 2008
RENO, NV -
Federal officials told a Senate committee Thursday that Bush Administration would like to work with Congress on Mining Law reform, including the possibility of royalties on hardrock minerals mined on public lands.
During Thursday's hearing Committee ranking member Sen. Pete Domenici, R-New Mexico, outlined three major objectives for reform of the 1872 Mining Law, which appeared to generate agreement among several members of the committee on both sides of the political aisle.
His objectives included:
1) Replacing the current system of mine and mill patenting with a more modern form of secure tenure;
2) Imposing prospective and profits-based royalty; and
3) Establishing an abandoned locatable mine reclamation fund to clean up sites that threaten the environment and public safety.
Several of the senators who spoke at the hearing said they favored a clean slate approach of compiling their own Mining Law reform over adoption of the Hardrock Mining and Reclamation Act of 2007 (HR2262), which had been approved by the House.
"Clearly this is a complex issue that will require compromise and a great deal of hard work," Domenici said. "Nevertheless, I am optimistic that we will be able to find a more balanced approach that will provide a fair return to taxpayers for the use of federal resources while ensuring that America has a robust mining industry." Hardrock mining in the home state of both Domenici and Energy and Natural Resources Committee Chairman Jeff Bingaman primarily involves copper and molybdenum mining.
"It is important to remember that while the Mining law itself has not been updated, there have been numerous new environmental laws that are still applicable to mining. For that reason, and in light of the fact that America increasingly relies on foreign countries for miners, I believe that the scope of our efforts should be limited to patenting, royalty and abandoned mine issues," he declared.
Sen. Ken Salazar, D-Colorado, a former state administrator who regulated both hardrock and coal mining in Colorado, said he believed Domenici's priorities were "issues we can grapple with." Nevertheless, Salazar stressed that Good Samaritan legislation limiting the legal liabilities of those third-parties who clean up abandoned mines was critical to dealing with the problem of abandoned mines that dot western landscapes.
While acknowledging that mining law reform is long overdue, Sen. Lisa Murkowski, R-Alaska, said Alaska miners "are quite concerned about what has come out of the House." She stressed that reform needed to also recognize the economic performance of mines and the security of tenure issues vital to mining investment.
Wyoming Sen. John Barrasso, an orthopedic surgeon, said he appreciated value of domestic metals production during surgeries he performed to implant artificial hips. Citing the national security aspects of maintaining certain domestic mining production, Barrasso said he hoped mining law reform would be "built on competitiveness, certainty and common sense."
He indicated that he was particularly troubled by provisions in HR2262 would provide explicit veto authority for the Secretaries of Interior and Agricultures regarding mining projects on BLM and U.S. Forest Service lands.
While the senators heard a lengthy litany of testimony from witnesses who had also spoken before the House Natural Resources Committee, a statement by Deborah Gibbs Tschudy, Deputy Association Director, Minerals Revenue Management for the Minerals Management Service, garnered particular attention.
Basically, Tschudy indicated that the Bush Administration would consider a royalty on hardrock mining on public lands. "The Administration believes that if Congress chooses to apply royalties to hardrock minerals, the royalty provisions should be set at a level that does not threaten the continued, reliable domestic mineral production on which this nation relies," she told the committee.
However, she outlined several challenges imposing such a royalty program would present.
- Simplicity: A successful federal royalty program would have to be clear and well defined in statute, minimize the possibility of litigation, reducing the complexity of royalty calculations and deductions-all while providing a fair return to taxpayers.
- Adequate audit and compliance resources are needed to implement a hardrock royalty program.
- Efficient and effective automated reporting system.
- Audit and investigative authority.
- A strong and effective enforcement program.
Just what model of taxation should be applied to hardrock mining remains a heated subject for debate. Several senators strongly oppose the 8% gross royalty mandated in the House mining law reform bill. Others suggested a possible range from 2% to 5% gross royalties may be considered.
Committee Chairman Bingaman said he will ask the Congressional Budget Office to do an analysis on hardrock mining royalties, prior to suggesting whether the royalties should be gross or net profits, or what amounts should be considered by the committee.
OTHER MINING ISSUES
William E. Cobb, Vice President of Environmental Services for Freeport-McMoran, said he believes the "existing comprehensive framework of federal and state environmental and cultural resources already regulates all aspects of mining...Additional federal regulation is unnecessary, duplicative and unreasonable." He opposes giving the Secretary of Interior the right "to stop a mining project when all environmental and other legal requirements are met."
Former BLM and U.S. Forest Service chief Mike Dombeck contends that "once claimed, it is nearly impossible to prohibit mining under the current framework of the 1872 Mining Law, no matter how serious the impacts might be." He believes that mining reform legislation needs to reaffirm the doctrine of multiple-use and recognize the value of public lands for hunting and fishing and fish and wildlife habitat.
Henri Bisson, Deputy Director of the BLM, says the agency believes that "existing statutes and related regulations provide sufficient authority to regulate mining operations when properly monitored and enforced by state and federal regulatory agencies."
Bisson said the Bush Administration supports the authorization of production payments and administrative penalties that promotes the environmentally responsible development of hardrock minerals on public lands.
Dombeck also advocates that mining law reform should prohibit the patenting or sale of public lands to mining companies.
Ryan Alexander, President, Taxpayers for Common Senate, also wants to permanently end the patenting of federal land. The organization also wants the end of the percentage depletion allowance tax break for mining.
Mining attorney James F. Cress believes a gross royalty "will adversely impact investment in mining projects." He also suggests that a gross royalty is punitive during periods of low commodity prices.