Mineral Royalties Would Undermine US Mining Industry

Article excerpt

WHAT you hear is not necessarily what you'll get, despite the Clinton administration's recent decision not to seek congressional approval of a 12.5 percent mineral royalty in the federal budget.

The White House continues to say it's committed to mining-law reform over the long haul. As an advocate of drastic change in current mining law - changes that would include royalties and an increased fee structure - the new administration should review the history of the mining industry. As early as 1807, a 10 percent royalty on lead production was established. It was later reduced to 6 percent. Even so, by 1835, neither miners nor smelters could pay the royalty. Production stopped until the royalty program was terminated.

Production in Midwestern copper mines was stalled until the 1850s, when 20 percent royalties, which were imposed in 1843, were dropped and land fees reduced. During debate on the predecessor of the current mining law, the Quartz Act of 1866, Congress again rejected imposing a royalty. Ever since, when debating mining law, Congress has decided against royalties on hard-rock mining.

Congress's concern through the years has been that imposing a royalty would unduly harm the mining industry. In the current competitive world mineral market, where most hard-rock mineral prices are determined, this concern takes on added significance.

No major mineral-producing country that competes with the United States in mineral production imposes a federal royalty. Mexico has recently repealed a 7 percent royalty to encourage its mining industry. A 12.5 percent gross royalty, as suggested by President Clinton, would place the US hard-rock mining industry at a substantial competitive disadvantage. Small mining companies - or one-person or family operations like those we have in Alaska - would bear the harshest effects of a gross royalty program. Many mines in Alaska don't return 6 percent over their lifetime.

Just this year, the Green's Creek Mine - Alaska's silver, lead, and zinc mine of world-class production capacity - shut down production because of inability to compete with world prices. …