Congress urged to change old mining law

Former transition team official says companies could pay federal royalties of up to 8 percent

Posted: Monday, March 02, 2009

WASHINGTON - Contradicting a Barack Obama campaign position, a former transition team official said mining companies could pay federal royalties of up to 8 percent for gold, silver and other hard-rock mining on public lands.

John Leshy, who served on the president's Interior Department transition team, told a House panel Thursday that revisions to a 137-year-old hard-rock mining law were long overdue. He said the government should reinstate environmental restrictions for hard-rock mining on public land that were wrongly abandoned by the Bush administration, contending that legislation that would impose environmental controls and first-ever royalty fees would not hurt the industry.

"Gold is, and has been for quite a long time, a very profitable industry," Leshy, a professor at the University of California Hastings College of Law, told the House Natural Resources subcommittee. "Its current position is indeed enviable in comparison to the economic carnage currently being visited across much of the American economy."

He said the industry "can readily absorb the modest royalties levied."

Leshy also expressed support for legislative provisions that would direct the Interior secretary to veto any mining proposal that causes substantial environmental harm. As the Interior Department's top lawyer in the Clinton administration, Leshy issued a 1999 legal opinion that said such mining proposals must be blocked by the department under current law - only to see it reversed during the Bush administration.

The mining industry is citing the declining economy as the latest reason to block congressional efforts to update the General Mining Act of 1872. That law was signed by President Ulysses Grant to help develop the West's mineral deposits in the 19th century.

Under the law, private companies haven't paid royalties to taxpayers for an estimated $245 billion worth of minerals extracted from public lands in more than a century. It also allows companies to buy public land for as little as $2.50 an acre.

Since Obama took office, the Interior Department has said the 1872 law should be updated based on a consensus reached between the environmental and mining communities.

Legislation introduced last month by Rep. Nick Rahall, D-W.Va., who chairs the House Natural Resources Committee, calls for an 8 percent gross royalty on mineral production from new mines on public lands and a 4 percent gross royalty on mines that are already in operation.

A similar mining reform measure passed the House 244-166 in 2007, but failed to make it out of a Senate committee due partly to opposition from Senate Majority Leader Harry Reid, D-Nev., and a veto threat by then-President George W. Bush.

Mining is worth $5 billion yearly to Nevada, and Reid, a gold miner's son, says the proposed royalties are too high.

In November 2007, candidate Obama told reporters in Nevada that the measure was too burdensome on industry and could end up costing miners jobs in Nevada and other Western states. He said he hoped to find a compromise between environmental protection and a healthy mining industry.

"Given the difficulties that the industry is already having in maintaining its operations, I think it is important for us not to move with royalty payments that are so significantly higher than they were previously," Obama said at the time.

Sheri Eklund-Brown, chair of the Elko County board of commissioners in Nevada, told the House panel Thursday that the mining industry provides the highest-wage jobs in the state, and "today no community can have enough high-wage jobs."

Leshy said gold has more than tripled in value against the U.S. dollar since April 2001 to about $1,000 an ounce, more than double the average cost of production.

The majority of the federal lands where hard-rock mining operations occur are in 12 Western states: Alaska, Arizona, Colorado, California, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

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