Report Finds Mining Subsidies Cost Taxpayers Billions

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Report Finds Mining Subsidies Cost Taxpayers Billions

Failure by Congress to reform the nation's mining law and to rein in long-standing special interest subsidies could cost U.S. taxpayers approximately $1.6 billion over the coming decade, according to a new report released today by the Pew Campaign for Responsible Mining. The report comes along with a new push in the U.S. House of Representatives to reform the 19th century law.
Reforming the U.S. Hardrock Mining Law of 1872: The Price of Inaction” reviews federal government data and finds that U.S taxpayers and the federal treasury stand to lose an estimated $1.6 billion in potential revenue over the next decade. The report links the revenue loss to outdated policies that subsidize the mining of gold, uranium and other metals on federal public lands.
“In these difficult economic times, it goes without saying: We can no longer afford to ignore a billion-dollar stream of untapped revenues,” said Velma Smith, manager of the Pew Campaign for Responsible Mining, a project of the Pew Environment Group, and author of the report.  “It's time for Congress to stop the mining industry's free ride and start treating it like any other business that uses public resources.”  
Rep. Nick Rahall (D-WVA), Chairman of the House Natural Resources Committee, is expected to introduce the Hardrock Mining and Reclamation Act of 2009 today to reform the General Mining Law of 1872, signed by President Ulysses S. Grant, which allows mining companies to take uranium, gold and other “hardrock” minerals from western public lands without compensating taxpayers. In contrast, oil, gas and coal industries have been paying royalties for decades.
Today's bill is identical to one passed by the House in 2007 on a vote of 244 to 166. The Senate did not produce a bill in the 110th Congress, but Senator Jeff Bingaman (D-NM), Chairman of the Senate Energy and Natural Resources Committee, has signaled his interest in addressing mining reform early this year.
“We are pleased that Chairman Rahall is making mining law reform a top priority,” said Smith. “We look forward to working with Chairman Rahall, Chairman Bingaman and Interior Secretary Ken Salazar to finally fix this outmoded law, which has been a boom for a handful of global mining companies and a bust for American taxpayers.”
The revenue losses reviewed in the Pew report come from three sources:

  • a royalty-free giveaway of gold, uranium and other valuable metals found on public lands – at a 10-year cost of $400 million;
  • failure to collect a reclamation fee similar to that placed on coal for cleanup of abandoned mines – at a 10-year cost of $290 million; and,
  • special tax breaks that allow mining companies to deduct costs in excess of investment – at a 10-year cost of $1 billion.

“The lost revenues associated with outdated mining policies loom even larger in the face of mine cleanup costs,” said Smith. According to the Environmental Protection Agency, the cost for cleanup of abandoned hardrock mines could run as high as $54 billion. Much of that cost could ultimately be borne by U.S. taxpayers.
According to the Congressional Budget Office, approximately $1 billion in non-coal metals are taken from federal lands each year. Under the 1872 mining law, these minerals are extracted without royalty or rental payments.  The reform measure proposed by Rahall would impose a 4 percent royalty on existing mines and an 8 percent royalty on new mines. Coal operators pay royalties of 8 to 12.5 percent for mining operations on public lands, in addition to production fees to fund cleanup of old coal mines. Royalty rates for onshore oil and gas leasing are generally 12.5 percent; offshore rates run to 16.67 percent.
Over the years, the 1872 mining law has been interpreted to elevate mining over other uses of public land. It has minimum environmental standards and clean-up requirements, despite the fact that hardrock mines emit more toxics chemicals than any other industry.

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