Murkowski calls for cautious mining reform

Reform of the nation’s 137-year-old hardrock mining law is overdue, but Alaska Sen. Lisa Murkowski says Congress should take a cautious approach to make sure the law doesn’t wind up shutting down viable companies.

 

Murkowski serves on the Senate Energy and Natural Resources committee, which met last week to consider reform of the General Mining Act of 1872 that would make mines on federal land pay royalties for the first time.

 

Murkowski, the panel’s top Republican, expressed concern that the proposed language could hamper economic development by drastically increasing fees and royalties, placing huge swaths of public land off-limits to mineral production, and instituting a long list of new regulations.

 

Reform bills have been introduced in the House and Senate, but past attempts at reform have foundered in the face of opposition from industry and many western U.S. lawmakers. The Obama administration says it will make reforming the law a top priority despite a full plate of higher profile issues, Interior Secretary Ken Salazar said at the hearing.

 

“It is time to ensure a fair return to the public for mining activities that occur on public lands and to address the cleanup of abandoned mines,” said Salazar, a former U.S. senator from Colorado.

 

The Environmental Protection Agency’s announcement last week that it plans to develop new regulations related to bonds or other financial assurance by mining companies to protect against environmental abuses creates “a greater sense of urgency” for reform, Salazar said.

 

“We are committing significant resources from the Department of Interior to get this done,” Salazar told reporters after the hearing. “I think there is a possibility we can get mining reform done in this Congress.”

 

Not so fast, said Murkowski.

 

“The current mining law is woefully out of date. We need to overhaul the law to ensure that it strikes the right balance between protecting the environment, obtaining a fair return for taxpayers, creating jobs and maintaining a secure supply of American minerals,” Murkowski said.

 

What’s “fair” depends on whom you ask.

 

One bill from Sen. Maria Cantwell, D-Wash., calls for a 4 percent to 8 percent royalty. Another from Sen. Jeff Bingaman, D-N.M., wants 2 percent to 5 percent.

 

Murkowski would prefer something on the low end, 2 percent to 3 percent, according to her energy committee aide Robert Dillon.

 

“If you’re using public land, taxpayers should be compensated for it. The issue is how you do it,” Dillon said. “They’ve done no analysis on certain provisions, and you need to do the analysis.”

 

Dillon said Murkowski was exploring the possibility of writing an alternative bill.

 

Murkowski’s second question is over-protective set-asides. There are federal rules covering the issue, “and our position is, if it’s not broken, why fix it?” Dillon said. Murkowski’s final issue with the bills is how they handle patents, or claims to the land. Dillon said the senator would like to see lease sales similar to what is done with oil and gas.

 

Alaska’s five major mines — Usibelli (coal), Greens Creek (silver, zinc, gold, lead), Red Dog (zinc, lead, silver), Fort Knox (gold) and Pogo (gold), would not be affected by a federal law because they are on state or Native lands. As such, they pay other fees through rents, royalties and taxes.

 

In 2008, the mining industry in Alaska was second only to oil and gas in its average pay ($82,600), and returned $15.6 million to local government, $105 million to state government and $212 million to Alaska Native corporations. Mining produced $1.3 billion in exports, 34 percent of Alaska’s total exports.

 

Steve Borell, executive director of the Alaska Miners Association, said the state’s best lands for potential mineral extraction were chosen by the state’s Native corporations and the state itself, but “there is interest in some of the federal lands, places in Southeast and throughout the Interior also. For a couple of reasons, the Native corporations had their pick of the BLM (Bureau of Land Management) lands, and wherever possible, they selected the ones with the highest mineral potential.

 

“The state of Alaska, similarly, has selected lands because of the job potential because there are no trees there, no fish there.”

 

Borell said the most immediate effect of a federal royalty would be felt by the 150 to 200 small family placer (streambed) mines in Alaska, because many are on federal land.

 

Both Borell and Murkowski said the difference between a profitable operation and shutting down is a thin margin.

 

“If you put too heavy a royalty on an industry with too thin of a margin to start with, there will be no development,” Borell said. He gave Greens Creek as an example, a mine that was shuttered due to low prices in the early 1990s. A gross royalty fee likely would have kept it closed and started reclamation, Borell said. Instead, the mine today is one of the largest silver producers in North America and the largest taxpayer in the Juneau borough.

 

“Minerals are the building blocks of infrastructure, technology, defense and industry,” Murkowski said. “They’re also essential to the new, clean-energy technologies that this very committee has sought to advance.”

 

The U.S. imports 100 percent of the quartz crystal needed for the photovoltaic panels used in solar power generation, 91 percent of the platinum for fuel cells, 100 percent of the indium for LED lighting technologies, and 100 percent of the rare earth minerals for advanced batteries.