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May 29, 2015

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The Policy Racket

Obama proposal for new mining fees puts Harry Reid in tough spot

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President Barack Obama pauses during a speech outside Orr Middle School at a "Moving America Forward" rally Friday, October 22, 2010.

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Harry Reid

Sun Coverage

WASHINGTON - There are two basic ways to bring down a deficit: cut spending or raise tax revenue. There’s plenty of both in this budget.

But one proposal is bound to rub a long-standing Nevada industry the wrong way.

In an effort to “provide a better return to taxpayers from mineral development,” the president is proposing a wash of new royalties and fees on the hardrock mining industry, that he says, along with reductions in oil and gas subsidies, will save the country $3 billion over the next 10 years.

It’s a slice that’s bound to put Senate Majority Leader Harry Reid -- who’s been praising Obama’s budget as “a serious attempt to make those tough choices” -- between a rock a hard place.

For weeks now, Reid has been directing a budget-minded screed toward Republicans, deriding them for trying to protect billions in subsidies to oil and gas companies while being willing to slash those dollars from entitlements, social programs and job training programs.

Reid’s also been a loyal backer of the hardrock mining industry, and while he's said in the past that there’s room for "common sense reform," he’s not a proponent of slapping the industry with fees that could hinder its continued growth.

But now, it seems, he might be willing to abandon his previous principled stance in favor of supporting the president's initiative to scale back everywhere -- including close to home.

“I'm willing to consider any proposal for mining reform that protects the mining industry, doesn’t kill jobs and shares revenues with the state," Reid said in a statement released Monday. "I will carefully study the president’s proposal to determine whether it meets these criteria and ensures that one of the pillars of the state’s economy can continue to create jobs and strengthen the economy.”

The president’s budget proposes instituting new royalties on silver, gold and copper hardrock mining, would require that states receiving mineral revenue payments pitch in to help some of the costs of managing the mineral leases that generate that revenue in the first place, and would establish a new fee structure for reclaiming abandoned hardrock mines -- a plan to hold the hardrock mining industry responsible for environmental impact in much the same way as the coal mining industry is expected to cover such costs.

While hardrock mining takes place all over the West, the changes will likely resonate most acutely in Nevada, where about 80 percent of all the gold mined in the U.S. is produced. It’s also an industry that is one of the few in the state that’s been on the upswing, as the price of gold per ounce has risen (in 2009, Nevada produced about $6.7 billion worth of gold).

Nevada's mining industry is also used to enjoying robust protections enshrined under the state constitution, which says that only actual proceeds of mines can be taxed. Standing in even sharper contrast to the president's proposal is that back in 1863, Nevada's constitutional drafters explicitly rejected suggestions that non-operating mines could be subject to taxes and fees.

The president’s proposal isn’t the first time in recent history that Congress might try to levy new taxes and fees on the hardrock mining industry. In 2007, a Democratically-led House passed the “Hardrock Mining and Reclamation Act” by a vote of 244-166 -- but that died at the door of the Senate’s gatekeeper, otherwise known as Harry Reid.

Of course, even Reid’s apparent willingness to parley doesn’t mean an overhaul of the industry will now be smooth sailing. Republicans don’t usually warm as well to environmentally-minded mining legislation as Democrats. Of the 166 who voted against the 2007 bill, 163 were Republicans -- and their ranks included the three men who now run the GOP’s House leadership team: Speaker John Boehner, Leader Eric Cantor and Whip Kevin McCarthy.

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