Another round against hardrock handouts

The frontier days are long gone, but hardrock mining companies still do business like it's the Wild West, with big government handouts and few taxes on spoils reaped from public lands. Back in the day, generous subsidies were used to boost mining in remote parts of the West. Today many of those old-fangled policies, including the General Mining Law of 1872, are still the law of the land.

Congress regularly takes a jab at mining reform. Sen. Jeanne Shaheen, D-N.H., made this year's first move, with a bill introduced last week. The bill, known as the Elimination of Double Subsidies for the Hardrock Mining Industry Act, would end a generous 1932 tax deduction that often exceeds the amount a company invests in a mine, piling big savings on top of the 138-year-old law that lets companies mine public lands for free.

"Mining incentives made sense when the government was trying to lure companies to America's untamed West 150 years ago," Shaheen said in a statement. "But the mining industry has matured and those days are over. Now we must end these outdated and inefficient tax breaks and instead focus on innovation in a 21st century economy."

Savings from the bill -- $250 million over five years -- would pay down the federal deficit, a provision that could win over its fiscally conservative, anti-tax opponents and mean a brighter future than the bill's last round in 2009, which tried to use savings to clean up old mines. Numerous past attempts to update outdated mining laws, including a full overhaul of the 1872 law, have fizzled in Congress.

The hardrock mining camp maintains that these subsidies are necessary to compete in global markets as the U.S. becomes more dependent on imports of minerals that could be mined domestically.

Thanks to the 1872 mining law, companies today mine gold, silver and other valuable metals from public lands free of charge, extracting $1 billion in mineral wealth per year according to the Congressional Budget Office. Adding the tax breaks on top of this giveaway results in a double subsidy for the industry.  Collecting royalties from hardrock mining -- like those garnered from the oil, gas and coal industries -- could bring in $40 million annually to broke government budgets, reported the Pew Campaign for Responsible Mining.

Beyond big subsidies, the old-school law also leaves federal agencies with few options to stop mining activity on public lands (HCN, 11/22/2010, "Hardrock Showdown").

The new bill would not seek royalties or increase federal authority as more comprehensive reform attempts have, but there are other efforts afoot to bring mining law into this century. The U.S. Environmental Protection Agency is updating another relic of the 1872 mining law that exempts hardrock mining companies from setting aside clean-up funds for the toxic messes they leave behind. EPA reported in 2000 that hardrock mining has contaminated headwater streams in 40 percent of Western watersheds. Under Superfund law, EPA plans to impose "financial responsibility requirements" on the industry to avoid adding to a backlog of some half-million abandoned mines that could cost over $35 billion to clean up, according to EPA. The new rules are due out this spring. Update: Draft rules are due out in early 2012.

Meanwhile, Congress will take another swing at a stubborn old policy still having its way with the West.

Nathan Rice is an HCN intern.

Photo of open pit copper mine in Ajo, Arizona courtesy Bureau of Land Management.