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for people who care about the West

Mining reform has one foot in the door

  For only the second time in 136 years, Congress is nearly unanimous in its call to update the 19th century law that still governs the country’s metal ore mining.

“There’s a pretty broad sentiment in both parties and both houses that the mining law of 1872 needs to be reformed,” says Luke Popovich of the National Mining Association.

In November, the House of Representatives passed the Hardrock Mining Reform and Reclamation Act of 2007 with a vote of 244-166.

The legislation would impose gross revenue royalties of 8 percent on new hardrock mining operations and 4 percent on existing operations. Those revenues would total $441 million over the next four years, estimates the Congressional Budget Office. Two-thirds of that amount would be earmarked for abandoned mine cleanup, which might cost as much as $50 billion, according to a 2004 estimate by the Environmental Protection Agency. The other third of generated royalties would fund public projects for communities adversely affected by mining.

The bill, now under discussion in the Senate, would also eliminate the patenting—or purchasing—of public land for mining, and replace it with a 20-year renewable operating permit.

Additionally, the House reform would give federal land managers more say over mining projects. Under the 1872 law, the Bureau of Land Management and the Forest Service are bound to grant mining requests as long as federal laws, such as the Clean Water Act and Endangered Species Act, are not violated. But the revisions would allow the agencies to deny permit applications if they found that mining proposals would cause “undue degradation” to local lands or economies. The proposed legislation would also allow agencies to weigh mining against other land uses.

“The House bill levels the playing field for mining and other uses of public lands, like hunting and fishing,” says Roger Flynn, director of the nonprofit Western Mining Action Project. “With the 1872 law, mining gets preference, but with the House bill, mining is no longer king of the hill.”

The bill would also allow local and tribal governments to petition the secretary of Interior to protect environmentally and culturally important areas, such as watersheds and sacred sites, from mining.

From the House to the Senate and from environmentalists to industry, some reform issues are, surprisingly, not contested.

“There’s wide agreement that it’s not okay to sell public land at $5 an acre,” says Lauren Pagel, policy director of mining watchdog Earthworks.

This “patenting” provision of the 1872 law has allowed mining companies, many of them foreign-owned, to acquire trophy real estate — or essential wildlife habitat — for little more than the price of lunch. Congress placed a moratorium on patenting in 1994. However, mines have used a grandfather clause to continue buying public land. Four years ago, the Red Lady Molybdenum Mine in Crested Butte, Colo., got title to 155 acres because it had applied for a patent before 1994.

Most parties involved also agree it’s high time mineral mining companies reimbursed the public for minerals extracted from public lands. Other extractive industries, including oil, gas and coal, pay royalties of 8 to 17 percent. But under the 1872 law, hardrock miners enjoy immunity from royalties. Over the years, Earthworks estimates that $245 billion worth of minerals have been taken from public lands.

In the Senate, however, the proposed legislation has met resistance. Many feel the House’s royalty plan and environmental protections would reduce the industry’s international competitiveness and increase reliance on foreign minerals. Senators are expected to propose their own reform plan.

Sen. Pete Domenici, R-N.M., the ranking member of the Senate Committee on Energy and Natural Resources and a longtime supporter of the mining industry, said in a committee hearing that because existing environmental laws already apply to mining, “efforts to expand reform beyond patenting, royalty, and abandoned mine issues are merely solutions in search of a problem.”

The amount and calculation of royalties are points of contention. Opponents of the House bill say imposing a royalty on existing operations is an unfair rule change. “If you’ve told your investors, ‘Here’s what our business plan looks like,’ then someone essentially confiscates X percent of that wealth, that plan might not be economic,” says Popovich. Some existing mines, he says, wouldn’t have gone forward if they’d known they would be charged 4 percent royalties.

Industry experts are also concerned that the House bill’s royalties will inspire investors to put their money into foreign mining operations. Jim Otto, advisor to World Bank on international mining law, says the 8 percent gross revenue royalty would be the highest hardrock mining royalty in the world, and would devastate U.S. operations if mineral prices fall. In his testimony to the Senate Committee on Energy and Natural Resources, Otto recommended a gross royalty of no more than 5 percent.

If the House bill becomes law, mining operations would lack the long-term security that investors want, says Carol Raulston, president of the National Mining Association. Opening a mine requires multi-year analyses and permitting processes, she says, and the 20-year operating permits the House proposes could leave prospective miners high and dry as they attempt to round up funds.

While no one is strenuously arguing for a return to patenting, the specifics of alternatives to the 20-year permit are “open to negotiations,” says Popovich.

If the Senate passes its own bill, the two houses of Congress will try to reconcile the differences between the two versions. The last time mining reform made it that far was in 1993, but the bill died when the houses failed to compromise.