DeFazio bill would create royalty, reclamation fee for hardrock mining

E&E News
By Manuel Quinones
July 11, 2014

Oregon Rep. Peter DeFazio, top Democrat on the House Natural Resources Committee, introduced legislation yesterday to dramatically reform the nation's non-coal mining laws.

Updating the 1872 Mining Law has been on the congressional radar screen for decades, especially among Democrats, but has not seen significant action since a reform proposal passed the House in 2007.

DeFazio's proposal would create an 8 percent royalty on gross income from new mines and a 4 percent royalty on income from existing mines. Small operators would be exempt.

The rates are lower compared with mining reform legislation introduced last year by Reps. Raúl Grijalva (D-Ariz.) and former representative and current Sen. Ed Markey (D-Mass.). That bill would have enacted a 12.5 percent royalty on gross income from mining (E&ENews PM, June 21, 2013).

"For over 140 years, the federal government has allowed mining companies to extract hundreds of billions of dollars' worth of valuable publicly owned minerals from our public lands without paying American taxpayers a single dime," DeFazio said.

"Adding insult to injury, the current law has allowed these mining companies -- many of them foreign-owned -- to carve up our lands and abandon the toxic, hazardous mess for taxpayers to clean up," he said.

DeFazio's bill would direct royalty dollars to abandoned hardrock mine cleanup. The bill would enact a new 7-cent-per-ton fee on material displaced during mining for the same purpose.

The coal industry has an abandoned mine land fund for abandoned coal mine cleanups. No such system exists for hardrock mines.

"My legislation will ensure the mining industry pays its fair share, meets modern environmental standards and addresses its legacy of contamination throughout the West," DeFazio said.

Another aspect of DeFazio's bill provides protections for good Samaritans, a term used for individuals or groups who want to pitch in to help remediate past mining pollution. Even though U.S. EPA released a guidance document in 2012 to help protect good Samaritans from liability, advocates have called for more protections.

Also, the DeFazio bill would make new lands, including wilderness study areas, off-limits to hardrock mining and would make it easier for federal regulators to deny hardrock mining permits. It would also create new bonding requirements.

"This bill is a win-win for taxpayers and the environment," said Lauren Pagel, policy director for mining watchdog group Earthworks, in a statement. "This outdated relic of a law costs Americans billions and puts our water at risk."

Natural Resources Committee Democrats released a report to accompany the legislation, which says 46 top mines produced more than $9 billion in minerals and would have paid $380 million in royalties during 2012 and 2013 under the bill.

"This number understates the total royalties that would have been collected in those years -- possibly by a significant amount -- because there was inadequate data to assess at least 26 other top-producing mines on public domain lands," said the report.

Bill would discourage 'mining investment' -- NMA

The National Mining Association, the industry's main lobby group in Washington, D.C., is not fully opposed to mining reform but has questioned Democratic proposals, including by President Obama.

They would rather a net -- rather than gross -- proceeds calculation for royalties. And they say the new reclamation fee for displaced material amounts to a burdensome "dirt tax."

"The allegation that U.S. taxpayers derive little or no benefit from metal and mineral mining on federal lands is not only blatantly false," said NMA CEO Hal Quinn, "it also demonstrates little understanding about mining, the economy and the need for mineral resources by U.S. industries."

Even though hardrock mines don't pay federal royalties, the mining industry is quick to stress the roughly $30 billion in taxes the industry pays, plus other fees. The industry also touts contributions to the U.S. economy worth $74 billion a year.

NMA and pro-mining lawmakers have also resisted new federal bonding requirements, noting those already in place by federal agencies and states. They have instead pushed for legislation meant to encourage the domestic production of metals and minerals, including streamlined permitting.

Added Quinn, "Far from being a 'give away' of taxpayers' resources, as the report alleges, mining on federal lands provides real value. By imposing additional taxes and redundant regulatory costs on mining, however, Rep. DeFazio's bill will 'take away' mining revenue and employment opportunities by discouraging mining investment."

But DeFazio said the bill was vetted by economists to ensure its viability. And, like other Democrats, he has touted the measure as deficit-busting.

The Oregon Democrat doesn't expect much action on the bill, especially in a gridlocked Congress with few legislative days left. But he's putting down a marker for future debate.

"I'm just going to push. Sooner or later, there's going to be enough pressure to do reasonable reform," said DeFazio, adding that it would be "better to do something reasonable" than to do something that could cripple mining.

Earthworks Executive Director Jennifer Krill said, "The 1872 Mining Law reform is a win-win for both jobs and the environment and ensures that taxpayers start getting a fair deal instead of giving away our minerals for free."