Congress considers new fees on hardrock mining
CASPER — The federal reconciliation debate is plodding backward, and hardrock mining royalties are back on the bargaining table.
Among the policies outlined in the Democrats’ $3.5 trillion, 2,466-page Build Back Better Act are new fees on the mining of locatable minerals, like gold and silver, on most federal lands. The royalties would apply to some uranium, bentonite and trona operations in Wyoming.
It’s been nearly 150 years since Congress passed the General Mining Act of 1872, granting U.S. citizens the right to establish royalty-free hardrock mines on public. And while hardrock mining operations do still pay state severance taxes, they’ve never been subject to the federal royalties imposed on coal, oil and natural gas production.
This isn’t the first time legislators have tried instituting hardrock royalties. It’s been a subject of dispute for decades.
“It’s been an issue basically since the gold rush days,” said Shannon Anderson, staff attorney for the Powder River Basin Resource Council. “There wasfederal law that was created to facilitate mineral development, mainly in western states, and that law has just never been updated.”
The reconciliation proposal would impose royalties of 8% of gross revenue for new hardrock mines and 4 percent of gross revenue for existing operations — the same rates approved by the House Committee on Natural Resources in 2007 — along with a reclamation tax of 7 cents per ton of earth moved.
It is, as always, controversial.
During a Senate Energy and Natural Resources Committee hearing on hardrock royalties last week, AutumnHanna, vice president of Taxpayers for Common Sense, characterized the 1872 law as being “egregious by modern standards” and desperately in need of reform.
“No business would set a price for land and stick with it for 150 years. No one thinks simply giving away valuable minerals for nothing makes fiscal sense,” she said.
Hanna urged lawmakers to maintain the gross revenue royalty outlined in the reconciliation bill. Unlike net royalties, gross royalties — the type imposed federally on coal, oil and gas — don’t account for companies’ post-production expenses.
Mining representatives, meanwhile, advocated for a net royalty that deducts their products’ sub- stantial production expenses, arguing that because they’re unable to pass increased costs onto consumers, it would better accommodate the price fluctuations of the global market.
Industry also called for a plan that recognizes minerals’ different economic conditions, rather than instituting a universal fee.
“As a small business operating in an industry with inherently low profit margins and heavy reliance on mineral resources on federal lands, our ability to compete in the domestic and international marketplace and independently mine these resources,” said David Brown, president and CEO of bentonite producer Wyo-Ben.
Sen. John Barrasso, R-WY, expressed frustration not only about the details of the proposal, but about Democrats’ partisan approach. He said during the hearing that he would be willing to consider updating the 1872 law, but not as part of the reconciliation bill.
“I can only support changes if Congress proceeds through regular order and therefore on a broad, bipartisan basis,” Barrasso said.“These changes are too consequential for Congress to pursue through the partisan budget process.”
Wyoming currently houses 21 licensed uranium mines, 26 bentonite mines, seven trona mines and two gold exploration projects, according to KyleWendtland, administrator of the Department of Environmental Quality’s Land Quality division. Most span some combination of private and public lands. Many would be on the hook for federal hardrock royalties.
State severance taxes amount to 2 percent of gross revenue for bentonite producers and 4 percent of gross revenue for uranium and trona producers. Surface coal operations, comparatively, pay 7 percent of gross revenue to the state and another 12.5 percent to the federal government.
According to Travis Deti, executive director of the Wyoming Mining Association, those taxes vary for a reason.
“They’re their own different animal,” Deti said. “Bentonite is very, very different than coal, and it’s very, very different than uranium. My industry is not monolithic.”
At present, the low barrier to entry, coupled with the minerals’ international price volatility, means that strong markets repeatedly attract new mining claims, Anderson said. When prices fall, that interest fades, leaving federal land managers unsure how best to manage the unmined claims.
“Having a royalty would be kind of step one, to at least right the ship on providing a return to the American public for the development of these resources, and it would also send a signal to speculators that the economics have changed in an important way,” Anderson said. “We’re no longer giving these resources away for free.”
But the mining industry is worried that gross revenue royalties could discourage exploration completely. Domestic uranium already struggles to compete with international production; bentonite’s profit margins are slim.