Obama proposes mining royalties

WASHINGTON -- The Obama administration is reviving a proposal to charge royalties on silver, gold and copper extracted from federal lands, to ensure taxpayers "receive a fair return" from mineral assets, according to budget documents released Monday.

The budget envisions a new leasing process, annual rental payments and a 5 percent royalty fee on a mine's gross proceeds, according to the Bureau of Land Management.

The charges along with other fees and tax increases being proposed for oil, gas and coal mining could generate $3 billion over 10 years for the U.S. Treasury, according to the White House Office of Management and Budget.

President Barack Obama's proposal could set the stage for new round of debate in Congress over whether mining pays its fair share on the value of the ore it pulls from federal lands. Reform efforts going back two decades have foundered over proposals to begin charging royalties, and it seemed unlikely that any new legislation would go far this year in the Republican-controlled House.

In 2007 the U.S. House passed legislation containing new environmental requirements for hard rock mines, and imposing an 8 percent royalty payment for new mines and a 4 percent royalty for existing mines.

The bill died in the Senate while the Bush administration issued a veto threat questioning whether it was constitutional and complaining the royalty rates were too high and would stifle industry.

Some Democrats in the Nevada Legislature have proposed raising state taxes on the mining industry to help balance the budget.

Among the players in Congress has been Sen. Harry Reid, D-Nev., a powerful ally of the mining industry, which is one of Nevada's largest economic engines that in 2008 directly or indirectly created 50,750 jobs in the state, according to the National Mining Association.

"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," Reid said. "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."

Rep. Dean Heller, R-Nev., whose Northern Nevada district contains most of the state's mining activities, opposed the plan.

"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," Heller said.

The government collected about $9 billion in various energy fees in 2010, but studies by the General Accounting Office and the inspectors with the Interior Department "have found that taxpayers could earn a better return through more rigorous oversight and policy changes, such as charging appropriate fees and reforming how royalties are set," White House officials said in a budget summary.

The new hard rock royalty would be assessed on gold, silver, lead, zinc, copper, uranium and molybdenum. Half of the receipts would be distributed to the states and half would go to the Treasury.

The administration also is proposing a new fee to clean up old mine sites.

"Just as the coal industry is held responsible for abandoned coal sites, the administration proposes to hold the hardrock mining industry responsible for abandoned hardrock mines," according to the BLM.

The fee would be charged based on the volume of material that a company displaces, and would be distributed through competitive grants aimed at restoring the most hazardous abandoned sites.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.