Mining Reform

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Today, Nick Rahall (D-WVA), chairman of the House Natural Resources Committee, is expected to introduce a bill to end the last big giveaway of the West’s public property: the General Mining Law of 1872. Passed during the Grant Administration, the law allows mining companies to remove gold, copper and other hard-rock minerals from public lands without paying a cent in federal royalties. Rahall’s bill will be at least the 15th time that Congress has tried to add a leasing or royalty provision to the law, but the search for government revenue in the midst of the financial crisis, combined with strong Democratic majorities in both houses of Congress, gives the effort a fighting chance of passing this year.

So how much money is at stake? The Pew Campaign for Responsible mining today released a report estimating that outdated mining rules will cost the treasury $1.6 billion over the next decade. But I’ve looked at the numbers myself, and that figure seems like a gross underestimate. Past studies have shown that royalties on hard-rock minerals would be worth $100 to $200 million a year. Then there’s the depletion allowance, a tax loophole that allows mining companies to deduct up to a fifth of their gross revenues. In 2001 the Clinton Administration valued the depletion allowance at $265 million on public lands alone, and in 1980 the government valued it on all mining lands at $1.75 billion. None of these figures are adjusted for inflation. So conservatively, the 10-year loss to the Treasury from outdated mining policies is more like $7 billion. Though that still might not seem like much in the bailout era, it adds up. The total losses due to the depletion allowance and the 137-year-old mining law are probably on the order of $100 billion–easily worth a bank bailout or two.

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