DOI interagency working group proposes overhaul of 151-year-old mining law; 4 - 8% royalties on hardrock mining
The US Department of the Interior-led Interagency Working Group on Mining Laws, Regulations, and Permitting (IWG) released its final report containing recommendations to reform and improve the way mining is conducted on US. public lands. The report will inform efforts to modernize the Mining Law of 1872 and related federal permitting processes as part of the Administration’s efforts to increase domestic supplies of critical minerals and uphold the strongest environmental, labor and community engagement standards.
The need for a rapid buildout of a clean energy economy is fueling a significant increase in demand for responsibly sourced critical minerals that power everything from consumer electronics to electric vehicle batteries. President Biden’s Executive Order 14017, America’s Supply Chains, ordered a review of vulnerabilities in critical mineral and material supply chains. Following that assessment, the Interior Department launched the IWG to review laws, regulations, policies and permitting processes pertaining to hardrock mineral development.
The report provides more than 60 recommendations to Congress and federal agencies. The report also identifies reforms to revitalize federal support for research into advanced, lower-impact mining and exploration technologies and methods, workforce development, and the need for increased resources to address the legacy of abandoned and unreclaimed hardrock mining sites that continue to pollute land and water throughout the country.
Among the many recommendations is placing a royalty on commercial production from mines on Federal lands.
The IWG recommends that Congress enact a royalty for hardrock mineral production from Federal lands. The IWG is not taking a position on whether such royalties should be placed only on new mines, on expansions to existing mines, or on all new and existing mines and mining operations. The IWG does note that there may be significantly more revenue available to improve permitting, address legacy sites, and share with Tribes, States, counties, and others when this royalty recommendation is applied to all mines.
For administrative simplicity, the IWG recommends adopting a royalty on net proceeds with a floor of 4 percent and a ceiling of 8 percent, which is within the range of existing State and international hardrock royalty rates. The IWG recommends that royalties not be fixed at a single value for all minerals but rather be specific to particular commodities (and possibly the ore grade). Mineral-specific royalties would facilitate consideration of supply and demand, development costs, and potentially regional differences between resources, and allow for tailoring incentives to national interests.—“Recommendations to Improve Mining on Public Lands”
The report recommends that Congress work with the mining industry, Tribes, mining communities, environmental organizations, labor organizations, and federal agencies to craft a transition to a new leasing system that increases certainty and stability for industry, strengthens domestic mineral supply chains, advances environmental sustainability, and fosters early and meaningful community engagement, while protecting existing mining claims and ensuring that an orderly transition does not disrupt near-term needs for securing responsibly-sourced critical minerals.
In the near-term, the IWG report makes dozens of recommendations for federal agencies that can be undertaken without Congress, including that federal permitting agencies adopt identified best practices for engagement, with early and extensive engagement with applicants, agency and intergovernmental partners, and impacted communities and Tribes prior to the start of the formal environmental review process. The IWG report also encourages exploration and mining companies to adhere to established best practices, such as beginning community and Tribal engagement at the earliest possible stage, providing financial support to allow communities and Tribes to hire independent technical experts, developing community and Tribal benefit agreements, and considering independent and transparent reporting of air and water pollution monitoring data.
The IWG report recognizes that the rapidly increasing demand for critical minerals will drive a surge in mine planning, permitting and environmental analyses. The report therefore recommends increased investment in mining-related training and agency resources to increase pre-application engagement and efficiently coordinate and complete environmental and permitting reviews.
The IWG report responds to the Bipartisan Infrastructure Law’s direction to federal agencies to report to Congress on recommendations to improve mineral permitting and to coalitions of Tribes and mining groups that independently filed rulemaking petitions requesting mining reforms. Pursuant to the Law, within 90 days the Interior and Agriculture Departments will develop a performance metric to track improvements in permitting timelines.
The report follows a previous announcement from the Interior and Agriculture Departments on steps to implement new regulatory and policy recommendations designed to protect Tribal interests and resources from the impacts of mining, increase Tribal engagement in mining proposals, and promote well-designed mining activity that accounts for climate change and current standards and technologies.
Negative reaction from industry. In response, the National Mining Association (NMA)—the major national trade organization that serves as the voice of the US mining industry—called the IWG recommendations on mining unworkable and unreasonable.
It’s clear that when it comes to the global minerals game, the US is critically outmatched—by our geopolitical rivals and allies alike, and the administration acknowledges this. Unfortunately, if the Biden-Harris administration’s stated objective is to secure our nation’s domestic mineral supply chains while supporting responsible mining, the recommendations contained in this report don’t do anything to advance the ball. In fact, most of the recommendations made by the IWG reveal a fundamental lack of understanding of our industry and the laws that govern it, and will throw insurmountable obstacles in the way of responsible domestic projects and would-be investment.—Rich Nolan, President and CEO NMA
The NMA said the problems with the report were myriad, but highlighted four:
Leasing System. The IWG clearly fails to understand the significant differences between other extractive industries, where information is known about the extent of the reserves to allow prospective lessees to understand the potential rewards prior to bidding on the lease, and hardrock mining, where finding viable mineral deposits can take years and hundreds of millions of dollars to find a mineral deposit that can be produced economically.
Royalties. Industry has long said it is open to compromise on a reasonable prospective net royalty. But the IWG’s recommendation to impose a royalty of up to 8 percent is not only outsized but, for existing operations, a new royalty that was never accounted for in the mine plan of operation would erase profitability, potentially leading to an early mine closure and constitutional takings liability for the federal government.
Dirt Tax. There is a large amount of material moved on a mine site that is of no value to get to a tiny fraction of materials that are of potential value; applying a tax to material that has no value simply because it has been displaced could carry enormous costs and is nonsensical. Over the last decade, there have been executive and legislative proposals to impose a new tax or fee on the tons of materials displaced by hardrock mining operations. The proposals have not limited this dirt tax to material displaced at mining operations on federal lands and would be applicable to operations on public, state or private lands. None of the proposals have explained how this tax would work on the ground or if they would be repeatedly imposed every time material is moved around a site for a variety of purposes, including reclamation efforts.
Permitting Reforms. The IWG’s recommendations on permitting represent a missed opportunity for the administration to act aggressively to address the severity of the permitting problem while maintaining our world class environmental and safety standards. Separate from the work in the IWG, Congress specifically directed the administration in Section 40206 of the Infrastructure Investment and Jobs Act, to implement specific permitting improvements and to report to Congress (by 15 November 2022) on further recommended improvements. Department of Interior (DOI) and USDA ignored this statutory requirement. The IWG report provides no definitive direction or answer on when these already enacted permitting reforms need to be implemented nor does it address how the National Environmental Policy Act permitting improvements included in the Fiscal Responsibility Act will contribute to permitting improvements.