1872 Mining Law battle heats up again

December 12, 2012

The on-again, off-again battle to reform the 1872 Mining Law is back on again as Sen. Tom Udall (D-NM) and Rep. Raul M. Grijalva (D-AZ) requested the Government Accountability Office (GOA) to issue a report on mineral resources volume, value and revenue.

The new report could spur a renewed push to reform the 140-year-old law governing U.S. hard-rock mining. Under the General Mining Act of 1872, the government charges mining companies $189 to locate a claim and then $140 annually to maintain it after the first year. What the companies extract from public terrain is theirs to sell on the open market.

The GAO report estimates that extraction of oil, gas, natural gas liquids and coal on federal and Indian lands produced $11.4 billion in federal revenue last year. However, the report could not make a similar assessment for hard-rock minerals because federal agencies generally do not collect data on the value of hard-rock minerals taken from public land. The only reason to do so would be to calculate royalties, the report states.

“This should be front and center of the natural resource agenda for this next administration,” Udall told the Washington Post. “These hard-rock minerals belong to the American people, and today we’re quite literally giving our gold and silver away.”

In the past decade the price of metals has risen dramatically, — gold has soared from $9.64/g to $54.65/g ($300/oz to $1,700.oz), for example, and this makes the industry a tempting target for lawmakers looking for new sources of revenue. “Everybody’s penny-pinching, and here’s a penny we haven’t pinched,” Grijalva said in an interview with the Washington Post.

Last year, Interior Secretary Ken Salazar and Robert Abbey, then Bureau of Land Management director, reached out behind the scenes to some American mining companies, raising the idea of charging royalties based on the companies’ net revenue from their federal-land operations. Abbey, who retired from the agency earlier this year, said that he believes a compromise could be struck.

Carol Raulston, a spokeswoman for the National Mining Association, said the industry is now focused on making it easier to extract rare-earth metals and other strategic minerals by speeding up federal permitting and reducing potential lawsuits.

Newmont Mining Corp. spokesman Omar Jabara, whose firm’s top officials discussed royalties with Salazar and Abbey last year, wrote in an e-mail to the Washington Post that his company is open to paying royalties based on future net revenue.

Michael Dudas, managing director and mining analyst for Sterne Agee, said while metal ore firms have become a tempting revenue target for politicians across the globe recently, “what’s been bedeviling the companies is [that] the cost of building a mine, permitting a mine and, if you do that, operating a mine have risen at a pretty good clip as well.” If they face additional costs in the United States, Dudas said, they may “look elsewhere” to operate.

Industry officials say they contribute to the economy even without paying royalties.

Responding to an inquiry last year from Grijalva about the value of uranium that Denison Mines Corp. had extracted from public land, company chief executive Ron F. Hochstein did not divulge any specific figures. But he said the metal ore industry overall accounted for nearly 290,000 jobs and contributed $37.2 billion to the nation’s gross domestic product, according to an industry-commissioned PricewaterhouseCoopers study.

The Obama administration has included both disclosure and federal royalties for hard-rock minerals as part of its budget proposals for the past two years, without success.

The GAO performance audit was conducted from January 2012 to November 2012.


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