By Patrick Rucker
Wednesday, December 12, 2012
WASHINGTON -- Revising a 19th-century U.S. law that
governs the mining of gold and other precious metals could add billions of
dollars to federal coffers at a time of tight budgets, according to some
Democratic lawmakers and a government study released on Wednesday.
Taxpayers receive no royalties on metals pulled from
federal land, and officials drew a blank when they tried to find out how much
gold, silver, copper, and other valuable metal is sold.
"Federal agencies generally do not collect data
from hardrock mine operators," said the report
from the nonpartisan Government Accountability Office, which looked at the
market in 2010 and 2011.
But applying a metals levy of 12.5 percent -- the
benchmark government share for other resources -- could deliver hundreds of
millions of dollars a year to taxpayers, according to independent studies and
U.S. Rep. Raul Grijalva, who sought the report and
other data from the mining industry.
"As we face these fiscal challenges, these are the pennies that we
should pinch," said Grijalva, the leading
Democrat on the panel that oversees public lands.
of Arizona, and Sen. Tom Udall of New Mexico, who jointly called for the GAO
report, say taxpayers should also benefit from a gold price surge that has
boosted the bottom line for miners.
royalty formula on the 1.1 million ounces of yellow metal pulled last year
from Goldstrike mine in Nevada, the largest in
North America, could have yielded $150 million to taxpayers, according to a
Reuters tally of industry data.
Gold Corp., the mine operator, said only a fraction of Goldstrike
is on federal land, and the company's taxes have already quadrupled in the
five years of climbing gold prices.
Taxpayers are entitled to a royalty from metal sales
nevertheless, lawmakers said.
Under Grijalva's proposed
formula, Freeport-McMoRan Copper & Gold Inc.'s reserves of copper and
molybdenum, which is used to toughen steel, would return about $700 million
to taxpayers over the life of the mines, according to a Reuters tabulation of
The 1872 mining law that drove prospectors into
western states such as California still governs much of the industry.
But this no-royalty law is a costly anachronism when
mining giants can stake a claim on federal land for a few dollars an acre,
Udall said. The coal, oil, and gas industries, by comparison, have no such
"We are giving our gold and silver for free and
don't even know how much we are giving," said Udall, whose father,
Stewart, was secretary of the Interior during the 1960s and called mining law
reform his great unfinished work.
Lawmakers who have occasionally tried to reform the
mining rules have never cleared all the hurdles to pass new laws, as the
industry has strong political allies.
Senate Majority Leader Harry Reid, a Democrat,
counts on mining support in his home state of Nevada, and lawmakers say it
will be difficult to persuade him to take a bite out of the industry.
But on Wednesday the two top senators on the Energy
and Natural Resources Committee said they were open to considering reform.
"There's been agreement for a long time that
the 1872 Mining Law should be updated to include a royalty" and reduce
paperwork, said Sen. Lisa Murkowski, the panel's top Republican.
Ron Wyden, the incoming Democratic chairman of the
committee, also believes the matter is due for review.
"This is one of a growing number of issues that
Senator Wyden plans to look at in the next Congress," said spokesman
Whether or not mining reform can become law, some
lawmakers are ready to target the hundreds of millions of dollars in tax breaks
the mining industry claims each year, which they see as an easier political
"There are a lot of write-offs, and this is an
issue we can bring to the coming debate about tax reform," Grijalva said.
Those allowances also benefit the oil and gas
industry, the GAO report says, with the federal take on energy exploration
running billions of dollars below target.
The offshore oil fields that were supposed to
deliver a 12.5 percent royalty to taxpayers brought about 8 percent in 2010
and 2011, according to the report.
One explanation for the shortfall, the report says,
is industry allowances for the cost of transporting fuel and incentives meant
to encourage some exploration.
"We need to always be looking back and seeing
if there is a good reason to continue with exemptions," said Udall.
"That's something we're not very good at in government -- ending the
exemptions when they're no longer needed."
State and local governments often catch a windfall
from mining revenue, and Udall said Republican lawmakers from the West might
be persuaded to increase the federal take.
"Everyone agrees we need a balanced package to
find new revenue," he said, "and this seems like the right time for