Mining industry should pay fair-market value

Posted: Friday, June 22, 2007

The Juneau Empire's front-page story, "State Mining Profits Surge," on Monday, showed that the mining industry is reaping profits from high mineral prices, with zinc being the most profitable commodity.

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In 1955, when Alaska's mining royalty rates were set, a pound of zinc was selling for 12 cents. In 2005, it was 63 cents. In 2006, it was 85 cents a pound. Gold is currently selling for more than $600 an ounce. Isn't it past time we take a look at the 52-year-old tax rates on Alaska mines to ensure that the mining industry pays its fair share?

As former Gov. Walter Hickel and the late Gov. Jay Hammond long argued, the tax structure on Alaska mines isn't, as our constitution requires, providing for the "maximum benefit" from the development of our resources.

Under Alaska's current mining laws, mining companies are required to pay rents and royalties. The royalty rate is 3 percent of their profit. This net-income royalty allows for the deduction of costs associated with mining. Most states realize a fare return from mining by requiring a net-smelter royalty, which is a royalty on the value of the mineral after it has been refined or smeltered, but without deducting the cost of development, production and environmental liability. A net-smelter royalty provides greater revenue predictability. Alaska and Nevada are the only states that have a profits-based, net-income royalty.

The mining license tax is 3 to 5 percent. Raising the license tax to 5 to 7 percent would better compensate Alaskans for the valuable, nonrenewable resources extracted from our lands. Since 1955, the mining industry has been extracting Alaska's mineral resources and making significant profits, especially in recent years with coal, minerals and metals at all-time highs, without paying a fair price to Alaskans for those resources. It's time for the mining industry to pay fair-market value for the minerals it extracts.

Vanessa Salinas

Campaign director, Alaskans for Responsible Mining


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