GAO report shows royalties from hard-rock mining could generate billions for U.S., if collected

2012-12-13T15:31:00Z GAO report shows royalties from hard-rock mining could generate billions for U.S., if collectedThe Associated Press The Associated Press
December 13, 2012 3:31 pm  • 

SAN FRANCISCO — While the U.S. government reaps billions of dollars in royalties each year from fossil fuels extracted from federal lands and waters, it does not collect any such royalties from gold, copper, uranium or other metals mined from the same places, congressional auditors reported Wednesday.

The federal government doesn’t even know how much these so-called “hard rock” mines produce from federal public lands in the 12 western states where most of the mining occurs, the Government Accountability Office report found.

And there is no federal law requiring the disclosure of production figures from individual mines.

Two Democratic lawmakers are hoping public concerns over the economy and the looming “fiscal cliff” will reinvigorate a movement on Capitol Hill to reform the General Mining Act of 1872, which exempted mining companies from paying royalties for profiting from U.S. public lands.

They want miners to pay the same 12.5 percent in royalties as oil companies, a move that could bring hundreds of millions of dollars in new annual revenue.

The 1872 law “was designed to perpetuate the ‘go west, young man’ idea to bring people, commerce and industry to the West. But that’s done, it’s the new West now,” said Rep. Raul Grijalva, D-Ariz., who along with Sen. Tom Udall, D-New Mexico, requested the GAO study.

The U.S. Department of the Interior collected $11.3 billion in 2010 and $11.4 billion in 2011 from oil, coal and natural gas royalties and leases, the report found.

The mining industry, which has fought to kill similar reform bills, said it already pays billions in taxes involving mines located on state and private lands.

“In 2008, there were $20 billion in sales in U.S. metals, and we paid about $8.3 billion in various taxes on that,” said Carol Raulston, a spokeswoman for the National Mining Association. She said the industry supports fair compensation for the government but not a royalty comparable to what is paid by the oil industry.

Grijalva and Udall said they plan to make their case in the next session of Congress. Grijalva said he intends to introduce a bill calling for royalties on the mining of metals on public land.

“We can’t ignore these potential revenues any longer — not when the American people are counting on us to solve our economic challenges,” Udall said in a statement. “Hard rock mining reform should be part of that discussion.”

The new revenue — which Grijalva said could total as much as $2 billion annually depending on production — might be used for cleaning up abandoned mines, national parks and public lands. The bill would also require companies to disclose production levels on federal lands.

“The mining industry is a very powerful lobby, and they’ve basically kept the hands-off attitude,” Grijalva said, explaining previous failed attempts at reform.

The GAO estimated the value of hard rock minerals mined on federal lands in 2011 was about $6.4 billion. If the industry paid royalties comparable to oil companies, the federal government would have received $800 million in royalties from those mines.

The mining industry opposed a similar bill that passed the House in 2008 but died in the Senate the following year.

Other Democrats in Congress do not agree on mining reform.

Senate Majority Leader Harry Reid of Nevada — home to most of the country’s gold mining — has been outspoken against past approaches to reform. However, his office said he remains open-minded on the royalty issue.

“He’s willing to consider any proposal for mining reform that shares revenues with the state, protects the mining industry and doesn’t kill jobs,” said Kristen Orthman, Reid’s spokeswoman.

The mining association’s Raulston said the industry is not opposed to royalties in theory but believes charging a rate comparable to oil, coal and natural gas is unfair.

“Metals are not immediately sellable products — there are processes and refining needed to get out the impurities,” she said. “So, there are added costs in metals mining that you don’t see in other natural resources like timber, gas and coal.”

Supporters of royalties such as Grijalva say reform is overdue and multinational mining companies that profit from U.S. public lands should be paying.

“We’re not dealing with a grub stake or prospector going out there, but multinational companies that end up exporting most of the minerals they take out,” Grijalva said. “And we’re getting nothing back for taxpayers to maintain parks, offset the deficit and to clean up abandon mines all over the West.”

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Jason Dearen can be reached at — http://www.twitter.com/JHDearen

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(3) Comments

  1. Sukey
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    Sukey - December 16, 2012 5:44 am
    This is not a new idea, people have been advocating for this for decades. Its beyond time to do it. Problem? We keep electing gutless politicians who worry about being popular and re-elected. If I'm not mistaken, Canada already owns a number of mines in the US, reaping profit off America's land (there's huge mines all over Nevada that are now in Canadian hands).
  2. troutcreek
    Report Abuse
    troutcreek - December 15, 2012 6:44 am
    I agree, it is time for the laws that govern mining to be modernized. So many problems exist with the current law written in 1872. Royalties need to be paid for the ore removed from public lands, there needs to be some control over foreign companies that seem to dominate the mining industry in the US. How long will it be before China begins to invest in the "free ride" and becomes a major player in the industry? We do need some mechanism in place that protects "special places", mining companies unfortunately do not have the ability to recognize unique and fragile regions that should never be mined.
  3. elsie
    Report Abuse
    elsie - December 14, 2012 8:35 am
    As a worker in the mining industry I would very much like to see mining reform. Taking public property without compensation needs to stop. But the 'mine - all mine' mentality will be hard to reform after so many years of free lunch subsidies. As the article mentions, the feds do not even know how much gold, for example, is taken from the citizens' of the US by corporations from the US and around the world. Thus, mining companies generally oppose any royalty; even a small fraction of 1% would require some mechanism of acountability for how much gold is extracted. This would put an end to an opportunity for high-grading from the public estate. As it is now, on pouring day, when the gold is poured, there are a priveleged few who attend the pouring in private. Who is to say how much gold is poured and how much is delivered? Do we expect immaculate honesty from those who hold the gold in their hands? As an analogy, timber theft from public lands is as old as public lands. Imagine if dollar bills grew on trees; timber theft would become rampant.
    Mining reform also must include 'suitability' evaluation. Some places have values higher than gold (or other hardrock resource), and should not be allowed to be mined. It's way past time to reform rules for mining. I'd like to be able to go to work knowing that the rules are designed to minimize/avoid damage and fairly compensate the owners of the minerals.
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