Wednesday, November 23, 2011

"Dirt tax" proposed on hardrock mining

The Obama Administration is proposing significant changes to hard rock mining laws but one called the Abandoned Mine Lands Hardrock Reclamation Fund, is generating angst in the mining community. Paraphrasing the legislative proposal, all operators of hard rock mining operations shall pay to the Secretary of the Interior, a reclamation fee based on the tons of material displaced by the operation at the rate of 7.8 cents per ton of material displaced for fiscal years 2012 through 2015. Beginning in 2016 and in each subsequent fiscal year, the Secretary may adjust the fee rate. The fees would go into the reclamation fund.

Opponents of the fee are calling it a "dirt tax" because it applies primarily to the dirt and rocks overlying an ore deposit, sometimes called overburden. In some cases, the amount of overburden can be a larger volume than the underlying ore-bearing rocks. Also, the overburden must be removed first to reach the ore, meaning additional upfront costs before any revenue is generated. [Right, Lavender Pit, Bisbee AZ]

The National Mining Association says the Administrations own estimate is that this will cost the mining industry an additional $1.8 billion.

This is separate from proposals to charge reclamation fees or royalties on the ore itself. Arizona produces a little over 10% of the non-fuel minerals of the nation, so I would imagine a comparable amount of the fees would come from Arizona mining companies.

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