ELKO — President Barack Obama’s budget proposal would add a 5 percent gross royalty to hard-rock mining on public land and go after additional mining revenue, but an industry spokeswoman doubts the proposal will succeed.
“I don’t think these will be seriously considered. We’ll just have to see how it works out going forward,” said Carol Raulston, senior vice president of communications for the National Mining Association.
The Obama budget proposal includes three separate taxes aimed at the hard-rock mining industry, including a not-less-than 5 percent gross royalty, changing claim fees to leases for federal land, and creating a separate fund for abandoned mines cleanup.
“The three all together would certainly hurt the competitiveness of the U.S.,” Raulston said Tuesday.
The new charges and tax hikes on oil, gas and coal could generate $3 billion over 10 years for the government, according to news reports.
The U.S. Bureau of Land Management states on its website that the proposed budget “assumes a legislative proposal to reform hardrock mining on public and private lands by addressing abandoned mine land hazards and providing a better return to the taxpayer from hardrock production on federal lands.”
Raulston said the leasing system for hard-rock mining would probably require bids and more money up front, and this could have an impact on mineral exploration.
Oil and coal already are handled through leasing, but mineral exploration is through claims on public land.
A gross royalty would affect the mining industry, which has been willing to pay a net royalty that allows deductions for such things as equipment and reclamation costs, but opposes any gross royalty.
“In the past, we’ve talked about some sort of payment to the government,” Raulston said, but the bulk of that payment would have gone to a fund for cleaning up abandoned mines, rather than a separate fee against mining just for abandoned mines.
She said the proposal for more money from mining looks to be part of the administration’s effort to go after any special corporate incentives, as well as corporations in general and high-income individuals for more tax revenue.
Nevada Mining Association President Tim Crowley said Tuesday the Nevada industry has “always supported a reasonable royalty,” but he hasn’t had a chance to look at the budget proposal.
The Nevada association looks to mining representatives on Capitol Hill to represent Nevada’s interests, he said.
Sen. John Ensign, R-Nev., said Tuesday he opposes the budget proposal.
“Mining is the reason why some communities in our state have managed to stay afloat during this economic crisis,” said Ensign. “Any proposal that threatens the economic stability of our state’s mining industry or costs the high-paying jobs that this industry provides, does not and will not have my support.”
Senate Majority Leader Harry Reid, D-Nev., issued a statement Monday on the proposal in Obama’s budget.
“I’m willing to consider any proposal for mining reform that protects the mining industry, doesn’t kill jobs and shares revenues with the state. I will carefully study the president’s proposal to determine whether it meets these criteria and ensures that one of the pillars of the state’s economy can continue to create jobs and strengthen the economy,” he said.
Congress has yet to approve reform of the 1872 Mining Law.
The 2009 proposal from Rep. Nick Rahall, D-W. Va., was for a gross royalty of 4 percent on existing mines and 8 percent on new mines. Former Elko County Commissioner Sheri Eklund-Brown testified at a House hearing on that bill, stressing Elko County’s support for the mining industry.
Reid has blocked reform efforts in the past.
U.S. Rep. Dean Heller, R-Nev., sits on the House Ways and Means Committee, which should help discourage passage of the Obama proposal, according to Raulston.
Heller said earlier this year he doesn’t expect mining law reform to go anywhere in the current session, and he issued a statement Tuesday on the latest proposal.
“Mining has been one of the few bright spots in Nevada’s economy and it would be a mistake to take any action that could cost mining jobs. Instead of looking for new ways to tax businesses and create bigger government, the administration should work with Congress on pro-growth policies that will help get Americans back to work,” Heller said.
Hard-rock minerals include gold, silver, copper, molybdenum, platinum and uranium.
Raulston said Obama’s proposal calls for states to receive half of the royalties from hard-rock mining, and the federal government would receive the other half.
According to the BLM, the budget proposal links the gross proceeds royalties and leasing process.
“After enactment, mining for these metals on federal lands would be governed by the new leasing process and would be subject to annual rental payments and a royalty of not less than 5 percent of gross proceeds,” the BLM website states.
The BLM also writes that existing mining claims would be exempt from the change to a leasing system but would be subject to increases in the annual claim maintenance fees under the General Mining Law of 1872.
However, holders of existing mining claims for these minerals could voluntarily convert their claims to leases, the agency states.
According to the BLM, the proposal on abandoned mines would levy a fee on production of hardrock minerals on both public and private lands and would be charged on the volume of material displaced after Jan. 1, 2012.
The agency would then create a competitive grant program to restore hazardous hardrock mining sites each year, using an advisory council composed of representatives of federal agencies, states, tribes and nonprofit organizations, according to the BLM.