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November 30, 2015

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Obama’s position on mining royalties has morphed with the economic times

Adviser says president believes that industry should pay its share, that proposal opens conversation about changing mining law


AP Photo/Chris Carlson

Democratic presidential candidate Sen. Barack Obama, D-Ill., speaks during a rally in Elko on Wednesday, Sept. 17, 2008.

Four years ago, Barack Obama seemed quite taken with Elko.

As a Democrat, he waded into deeply Republican territory, visiting the small mining town tucked in Nevada’s northeast corner three times during his first presidential campaign. And he often peppered his speeches with references to Elko, using it as an example of his affinity for rural America.

On the 2008 campaign trail in Elko, Obama voiced his displeasure with proposals to put royalties on hard rock mining companies, saying that charging companies 4 to 8 percent to mine public lands could hurt jobs.

“I will make sure to maintain the industry here in Elko,” he said during a stop in 2008.

But after describing the royalties as too burdensome in 2008, Obama’s administration has put forward a budget proposing both a 5 percent royalty and a 7.8 cent-per-ton “dirt tax” to help with reclamation efforts.

The shift in position has drawn the attention of his 2012 foe, Republican Mitt Romney.

Today, Texas Gov. Rick Perry will speak at the opening of Romney’s Elko headquarters, and he’s expected to put a spotlight on Obama’s mining record.

“When he was campaigning for office, he had one position. Now that he’s president, he has another,” Romney spokesman Mason Harrison said.

An Obama campaign adviser acknowledged that Obama’s views on the issue have morphed — but so have the times.

Faced with a burgeoning federal deficit, the Obama administration doesn’t believe giving mining corporations royalty-free access to minerals on public land is justifiable.

“The industry is now one which — certainly in Nevada — is dominated by large corporations, some of whom are not even U.S. corporations,” the adviser said. “It’s hard to imagine a budgetary debate about balancing the national budget without looking to those corporations to pay their share, just as the other extractive industries do.”

The mining industry’s access to federal lands is still governed by a law passed in 1872. That law was designed to encourage a fledgling industry, but Republicans and Democrats agree it’s outmoded in an industry dominated by large multinational corporations.

During his 2008 campaign, Obama never said mining companies should get off scot-free. But he clearly wasn’t a fan of the royalty structure before Congress at the time.

“What’s clear to me is that the legislation that has been proposed places a significant burden on the mining industry and could have a significant impact on jobs,” Obama told the Reno Gazette-Journal in 2007. “We are going to have to keep on working to find the kind of legislation that is going to provide fair compensation for these federal lands and also enhances environmental protection (and) cleans up abandoned mines.”

Especially with gold prices where they are now, the Obama administration doesn’t see it as a choice between jobs and compensating the public for its resources.

“Look at coal, oil, natural gas. ... There’s no one who is seriously suggesting that the royalties paid by those extractive industries are making or breaking the jobs that are available in those various sectors,” the campaign adviser said, adding that the royalty and dirt tax proposals are a place to begin the conversation with Congress over how to change the 1872 mining law.

Half of the 5 percent royalty on gross proceeds would return to the state where the mineral was mined — a potentially large windfall for Nevada given the gold mining operations here.

The mining industry opposes Obama’s proposed budget, describing the dirt tax as a “punitive fee.”

“The U.S. is already a high-cost mining country due to labor, environmental control and safety-related costs,” said Carol Raulston, a spokeswoman for the National Mining Association. “These taxes would have made the U.S. noncompetitive in world markets for mining investment, causing jobs to move off-shore and making the U.S. even more dependent on outside sources for the minerals we use.”

Obama’s supporters argue the other side.

“There are a lot of people who question the fairness of mining companies extracting nonrenewable resources from public lands and not adequately compensating the people through their government,” former state Sen. Sheila Leslie, D-Reno, said, noting that mining companies go where the minerals are. “The argument that they’ll go elsewhere rings hollow.”

While the Romney campaign is quick to pounce on Obama’s proposed budget, his position on the 1872 mining law wasn’t immediately available.

In 2007, Romney told the Reno Gazette-Journal he didn’t have any specific changes to propose.

“The last bill on mining was from, what? 1872? Signed by Ulysses Grant. There’s been some suggestion we should look at that again,” he said. “That is something you want to do in discussion with people who understand the business and are closest to it.

“I don’t have a series of changes I would make to mining laws. I do want to make sure we don’t have any individuals with a bone to pick or some kind or a radical agenda in some way hurting the mining industry.”

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