Feds could collect $2 billion in royalties from Rosemont if copper mines paid same royalty as oil and gas producers

Share/Bookmark

If royalties similar to the 12.5 percent charged for oil and gas leases on federal lands were applied to the proposed Rosemont copper mine, the U.S. Treasury could collect nearly $2 billion over the next 22 years.

This amount dwarfs Rosemont Copper Company’s claim that it will contribute between $300 million and $400 million in local tax revenue over the life of the mine.

Rosemont says it will produce 240 million pounds of copper a year during the 22-year life of the mine.

At an average price of $3 per pound (copper was trading at $3.66/pound recently; the price has ranged between $3.29 and $3.93 over the last 52 weeks), the mine will generate  $720 million a year in revenue.

Applying the 12.5 percent royalty that oil and natural gas producers pay on federal lands to Rosemont’s gross revenue, the Rosemont mine would generate $90 million a year in royalties to the U.S. Treasury.

Over 22 years, this comes to $1.98 billion.

But hard-rock mines, like the proposed Rosemont mine in the Santa Rita Mountains south of Tucson, are exempt from federal royalties under the General Mining Act of 1872.

The exemption saves hard-rock miners billions of dollars a year in royalties that could be going to reducing America’s deficit. Many mining companies operating on federal lands are foreign companies. Rosemont Copper, for example, is owned by Vancouver, B.C.-based Augusta Resource Corporation.

The federal government has no accurate estimate of the amount and value of gold, copper, silver and other hard-rock minerals mined on federal land because the government does not collect royalties for these minerals, the U.S. General Accounting Office said in a report released yesterday.

The GAO report, requested by Rep. Raul M. Grijalva (D-Ariz.) and Sen. Tom Udall (D-N.M.), could spur a renewed push to reform the 140-year-old law governing U.S. hard-rock mining, The Washington Post reported today.

Under the General Mining Act of 1872, the government charges mining companies $189 to locate a claim and then $140 annually to maintain it after the first year, the Post reported. What the companies extract from public terrain is theirs to sell on the open market.

“This should be front and center of the natural resource agenda for this next administration,” Udall told the Post in a phone interview. “These hard-rock minerals belong to the American people, and today we’re quite literally giving our gold and silver away.”

While both Democrats and Republicans have tried to overhaul the nation’s mining laws for decades — Udall’s father, Interior Secretary Stewart Udall, called it “the most important piece of unfinished business on the nation’s resource agenda” when he left Lyndon B. Johnson’s Cabinet in 1969 — neither party has managed to overcome industry opposition, the Post reported.

The GAO report stated that while the U.S. Geological Survey collects extensive data on mineral production through its annual surveys, it does not collect data that would allow it to determine what proportion of this production came from federal land.

In addition, the GAO report found publicly traded hard-rock mine operators frequently include production information as part of their filings with the U.S. Securities and Exchange Commission, but they do not consistently report the amount of minerals produced from federal lands.

Similarly, many Western states collect data on the hard-rock minerals produced in their state for purposes of assessing a state royalty, but they generally do not collect data on the volume of those minerals extracted from federal land within those states, GAO found.

The rise of metal prices over the past decade — gold has soared from $300 to $1,700 an ounce, for example — makes the industry a tempting target for lawmakers looking for new sources of revenue, the Post reported.

“Everybody’s penny-pinching, and here’s a penny we haven’t pinched,” Grijalva told the newspaper.

Print Friendly
This entry was posted in Mining Law. Bookmark the permalink.

3 Responses to Feds could collect $2 billion in royalties from Rosemont if copper mines paid same royalty as oil and gas producers

  1. Donald Weinstein says:

    We can’t have it both ways: to collect royalties you have to allow mining. By promoting the royalty option you are in effect playing Rosemont’s game.

    • Beverly Parker says:

      Point taken: we don’t want the mine no matter what the royalties might be so you would think the issue of royalties is not part of our armamentarium. HOWEVER if the law were changed so that significantly greater royalties had to be paid wouldn’t it change the cost/benefit analysis of companies attempting to mine? (Though, alas, not of Augusta’s.) Moreover, might there not be popular outrage to be harnessed to the Rosemont fight when the public realizes that foreign mining companies are getting a steal.

  2. ALAN JOHNSON says:

    IT IS OBVIOUS THAT THE MINING ACT IS SADLY OUT OF DATE AND UNTIL IT IS UPDATED , THERE WILL BE MORE AND MORE UNSCRUPULOUS EXPLOITATION OF ARIZONA’S MINERAL WEALTH . A 12.5% ROYALTY ON MINING WOULD BE EXCESSIVE AND EFFECTIVELY RENDER ARIZONA A ” NON- MINING STATE ” . WHAT IS NEEDED IS A TAXATION SYSTEM THAT IS BASED ON A COMBINATION OF FACTORS THAT REFLECT THE COST OF PUTTING A MINE INTO PRODUCTION AND THE PROFITABILITY OF A MINE ONCE IN PRODUCTION . ANY VALUE ADDED PROCESSING COULD BE GRANTED TAX CREDITS . ALSO , MINING COULD BE CHARGED A LAND DISTURBANCE LEVY IN ADDITION TO TAXES . THERE IS SO MUCH ROOM FOR IMPROVEMENT BUT ARE ” THE POWERS THAT BE ” WILLING TO TAKE ON THE TASK . THE MINING INDUSTRY HAS A VERY STRONG LOBBY AND WILL OPPOSE ANY CHANGE THAT IS NOT FAVOURABLE TO THEM . IT MAY BE TOO LATE IN THE CASE OF ROSEMOUNT . ONE THING FOR CERTAIN IS THAT THE STATE SHOULD NOT BE USING TAX DOLLARS TO PROVIDE ROSEMONT WITH INFRASTRUCTURE UNLESS ROSEMONT AGREES TO REIMBURSE THE STATE FULLY THROUGH TAXES , LEVIES , ETC .