New Mexico congressman lauds Nevada mining tax

WASHINGTON -- Nevada's system for taxing companies that mine in the state was held up Tuesday as a possible model for Congress as it seeks to update federal mining law.

"I suggest that for everybody here who thinks this issue is complex, that we contract it out to the state of Nevada," Rep. Steve Pearce, R-N.M., said during a House hearing on mining reform.

Members of the House subcommittee on energy and mineral resources are examining alternatives to the federal mining law, which has not substantially changed since it was signed into law by President Ulysses S. Grant in 1872.

A mining bill introduced by Rep. Nick Rahall, D-W.Va., the chairman of the House Resources Committee, would allow the federal government to charge an 8 percent royalty for hard minerals such as gold, silver, copper and uranium, minus the cost of processing and transporting the minerals. The bill was modeled on existing coal laws.

Revenue from the tax would go to cleaning abandoned mines and to a community assistance fund.

Nevada's law is somewhat similar, but it charges only a 2 percent to 5 percent rate on the value of extracted minerals, minus extracting, refining and transport. The exact rate for the royalty depends on the size of mine profits.

Rep. Dean Heller, R-Nev., stressed the importance of mining to Nevada's economy, saying federal royalties could hurt both the state's $1.5 billion mining industry and the $60 million in state revenue generated by the state's tax formula.

"The royalty portion of this legislation in its current form presents many potential problems that directly impact my constituents -- most notably the loss of revenue to communities that would result from a royalty scheme that discourages investment and takes money directly out of local coffers," Heller said.

James Otto, an independent consultant on mining law and policy, said the United States is unusual in not charging royalties, but said 8 percent was too high and urged a rate based on the value of minerals extracted rather than volume.

"The experience of many nations has been that for most minerals a royalty rate of between 2 and 5 percent of mineral value has worked well," Otto said. "In British Columbia and Papua New Guinea they had a 2 percent royalty but took it up to 5 percent and exploration of new mineral sources collapsed."

Rahall said complaints about the royalties are similar to what he heard in 1977 when Congress was debating taxes for coal.

"The fact of the matter is that the gloom and doom predictions made by the industry all those years ago did not come about," he said. "Predictions, I would note, that are almost to the word identical to those which industry has leveled against this legislation."