Washington (Platts)--24Apr2008

Companies mining minerals like gold and uranium on federal lands could
find a government royalty tacked onto their operating costs if a group of US
senators gets its way.

But while a new mining royalty law is already gaining clout on Capitol
Hill, the debate ultimately boils down to how big a fee is reasonable.

A bipartisan group of senators this week sent a letter to the senate
Energy and Natural Resources committee, urging that a royalty be imposed as
part of the committee's update of the 1872 Mining Law.

"For 136 years, valuable minerals mined on federal lands have been given
to private interests for free," said the letter, signed by Sens. Russ Feingold
(R-Wisconsin), John E. Sununu (R-New Hampshire), Maria Cartwell
(D-Washington), and Judd Gregg (R-New Hampshire).

The lawmakers called on the energy committee to levy a "fair royalty" on
federal-lands miners and to roll back mining-industry tax preferences to pay
for abandoned-mine clean-up costs.

"For too long taxpayers have gotten nothing for these valuable minerals,
except the tab for costly clean-up of abandoned mine sites," Ryan Alexander,
president of Taxpayers for Common Sense, said in a statement supporting the
effort. "Taxpayers should not be forced to line the pockets of the mining
industry. It is time these companies be held accountable for the profits they
gain from our taxpayer-owned resources."

Last year, the US House of Representatives passed Resolution No. 2262 --
The Hardrock Mining and Reclamation Act of 2007 -- that imposed an 8% royalty
on new mines and a 4% fee on existing operations.

Luke Popovich, spokesman for mining-industry trade group National Mining
Association, told Platts that his group's members would be willing to support
a "modest" royalty based on net revenues, rather than on profits to take into
account steeper energy prices and other higher input costs that he said have
kept pace with the rising revenues metals and minerals fetch in the current
marketplace.

But NMA says an 8% federal-mining royalty exceeds what's affordable. Some
miners would cede to a fee of roughly 4% for new mines only, excluding those
already online, Popovich said. "Existing operations were based on business
plans that did not have to consider additional fees paid to the government,"
he told Platts.

The senators also urged the committee to repeal the tax credit known as
the percentage depletion allowance, and use the money to fund what the
lawmakers said is between $50 billion and $72 billion in costs for cleaning up
abandoned mining operations.

However, Popovich said the federal government should fund abandoned-mine
clean-up with revenues from mining royalties if imposed, rather than by
rolling back existing tax credits.
--Laura Gilcrest, laura_gilcrest@platts.com