Some say state killing source

CARSON CITY -- Some state and mining representatives are predicting that mineral exploration in Nevada will decline and that as a result, the state will not receive the almost $26 million in claims fees it anticipated this fiscal year.

State lawmakers increased mining claims fees by more than 600 percent to help bridge a budget deficit, but a state mining administrator said the action might not have the desired effect.

"We are essentially telling explorers to go someplace else," Alan Conyer, administrator of the Nevada Division of Minerals, said Monday.

"These people rent rooms, buy food and trucks, and spend money with the hope of finding a good mine. It is no different than people going to Las Vegas looking for a jackpot."

Citing the fee increase and the possibility of higher mining taxes in 2011, a Canadian-based think thank has downgraded Nevada's business climate for mining to the 10th best in the world. It had been third best or better since Fraser Institute began its annual rankings in 1997.

One mining explorer, Buster Hunsaker, owner of the Claremont Nevada Mines in Elko, has filed a lawsuit in District Court in his county that challenges the constitutionality of the fee increase.

And the higher fees have spawned the creation of the Nevada Mineral Exploration Coalition, whose membership includes geologists, claims holders and others concerned that the higher fees will deter exploration.

"They didn't think about us," said David Shaddrick, president of the new organization. "We were never consulted before they passed the claims fee increases."

Shaddrick added that half of the claims in Nevada were given up in 1993 when the U.S. Bureau of Land Management imposed higher mandatory federal claims fees.

State Budget Director Andrew Clinger said it would "be a problem" if the state does not receive all of the claims money. The money has been built into the current budget.

There are about 190,000 claims in Nevada, Conyer said.

Because of the higher fees, he expects some claims holders will drop their claims.

Conyer said the number giving up claims could be as high as 25 percent, but he said he has no good way of estimating the decline. Eighty percent of his agency's funding comes from mining claims fees.

During the special legislative session in February, legislators passed, and Gov. Jim Gibbons signed, a bill that imposed a one-time increase in mining claims fees to raise $25.7 million.

The increase came at a time when the state was experiencing more than an $800 million budget shortfall.

The claims fee increase represents about 1 percent of the state's $2.5 billion in current annual tax and fee collections.

Under the new law, those with 10 or fewer claims pay nothing more. But holders of 11 to 200 claims will pay $70 more for each claim. Those with 200 to 1,299 claim pay another $85 per claim, and those with 1,300 or more claims pay $195 more per claim.

The increases are on top of the $140 per claim all claims holders pay annually to the federal government and a $10.50 per claim state fee.

Of the $10.50 per claim state fee, $2 goes to the counties.

Tim Crowley, president of the Nevada Mining Association, said Monday that he represents the major mining companies, not exploration companies or individuals such as Hunsaker and Shaddrick.

Crowley said that he and legislative leaders talked before the special session on ways to increase the mining industry's contribution to the state, but the claims fee increase was not one of them.

He added there was no formal legislative hearings on the claims increase before it was approved.

About 60 percent of claims holders are not major mining companies.

Under the new law, mining exploration companies and individuals are expected to inform Conyer's agency by Nov. 1 whether they will continue to hold onto their claims.

They can pay all or part of their fees at that time, but under the law, they also can wait until June 30.

Because of the higher claims fees, Shaddrick said Nevada exploration is "on the slide down."

He expects Nevada will fall even lower in next year's Fraser Institute rankings if the Legislature decides to continue the higher claims fees or a mining tax is passed.

The conservative think tank surveyed 429 mining companies about the business climate in 51 areas around the world where they have mines.

"The Canadian provinces are bending over backwards to attract exploration," Shaddrick added.

Although 80 percent of the gold in the United States is mined in Nevada, that does not mean 80 percent of the known reserves are in the state, Shaddrick said.

With exploration dropping in Nevada, that means the amount of gold mined in Nevada will drop in future years as current reserves are depleted..

Hunsaker said legislators should have spoken with mining explorers before imposing the higher fees.

"In hard times, we're glad to contribute money to the state," Hunsaker added. "But you can't tax something that does not produce revenue."

Instead, he said, the Legislature should have taxed business profits. He said the fee increase is unconstitutional because any fees collected must go to support operations of the Nevada Division of Minerals, not to the state general fund.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3900.