US miners open to compromise on public land royalties

The National Mining Association, a trade association for U.S. miners, appeared open to compromise on paying for the right to mine on federal land, telling a Congressional panel that a net royalty on U.S. hard-rock mine operations would be an acceptable alternative to a gross royalty proposed by House Democrats in their budget reconciliation bill.

However, Katie Sweeney, National Mining Association executive vice president and general counsel, also told the Senate Energy and Natural Resources Committee on Oct. 4 that the organization would like to move forward outside of the partisan reconciliation from the debate the hard-rock mining provisions.

"Compromise is possible. The mining industry is open to reasonable royalties," Sweeney said. "Working together in a bipartisan way, we can assemble a package that helps secure our nation's economic recovery and prosperity for years to come without jeopardizing the mining foundation of our country."

The association represents large miners with U.S. operations, including Freeport-McMoRan Inc., Rio Tinto Group, Barrick Gold Corp. and Newmont Corp.

Hard-rock mines do not pay royalties to the federal government under existing mining law, which was last written in 1872. House Democrats targeted miners' profits in legislation they advanced out of committee in September that would impose a trio of new payments for the industry: an 8% royalty on new hard-rock mines, a 4% royalty on existing mines and a reclamation fee of 7 cents per ton on material displaced from mine sites. Oil, gas and coal produced on federal lands are subject to royalty payments under existing law.

The Democrats' proposal would specifically tax gross proceeds from mining sites. The National Mining Association said it wants a net royalty, as opposed to a gross royalty, because it would allow for post-production costs to be subtracted from the royalties that mines pay to the federal government. During the hearing, Sweeney did not specify what percentage royalty the association desires.

Speaking at the hearing, Barrick Gold general counsel Rich Haddock explained why miners are opposed to a gross royalty, saying it "picks winners and losers" by privileging miners producing minerals from higher-grade ore deposits, meaning it requires less work for the company to secure valuable material from the ground.

"A gross royalty becomes very regressive on hard-rock minerals, the price for which is set in the global market," Haddock said. "Unlike coal or some of these other commodities where the royalty cost can be ultimately passed on to the end consumer, it cannot be in gold."

Senate Energy and Natural Resources Chairman Joe Manchin, D-W.Va., whose committee has not yet released its proposal for the reconciliation bill, said the committee will attempt to find a middle ground on hard-rock royalties.

"If we can find a pathway forward is what we're looking for, [one] that doesn't put undue pressure," Manchin said at the hearing.