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Royalty treatment

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The United States collected roughly $10 million in royalty revenues from oil and natural gas mining on federal and tribal lands in 2011. The amount collected for extraction of precious metals like gold and copper from public tracts? Zilch.

Democrats in Congress are currently considering introducing an amendment to the 1872 General Mining Act lifting a royalty exemption for hard rock mining companies operating on leased federal property. The effort—identical to a provision President Barack Obama has proposed in past budgetsis being led by New Mexico Sen. Tom Udall and Arizona Rep. Raul Grijalva, and calls for the same 12.5 percent royalty that oil companies already pay on public land. Grijalva told the Associated Press earlier this month that such a royalty could net the government as much as $2 billion annually depending on the volume of production.

According to a report issued by the U.S. Government Accountability Office in November, the government doesn't have a clue how much companies mining gold, silver, uranium and other precious metals produce or make a year. With no royalties to collect, federal agencies don't feel the need to gather that data.

The 12.5 percent royalty, which Udall and Grijalva intend to propose in the next session of Congress, could impact a number of mining operations in Montana. Spokane-based Revett Minerals extracts silver and copper from its mine in Troy, and is still in the process of obtaining state and federal permits for its proposed Rock Creek mine project near Noxon. The company reported $52 million in revenue during the first nine months of 2012.

Revett CEO John Shanahan says talk of royalty reform isn't particularly surprising, given the country's current economic climate. But he's not sure the hard rock mining industry could bear the same type of royalty rates now imposed on oil and gas companies, which enjoy more tax breaks and government incentives. Instead of creating more revenue, Shanahan says, a royalty program "could have the opposite effect. It could have the effect of stifling new projects, or closing down or making uneconomic current projects."

Various environmental groups have positioned themselves firmly in favor of a royalty reform act. Nonprofits such as the League of Conservation Voters, which spent millions in the 2012 election opposing a host of pro-development Republican candidates, believe the royalties could be used to fund mine clean-up projects nationwide. So far, Udall, Grijalva and Obama agree.

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