Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
When should modern Americans care about legislation signed into law by President Ulysses S. Grant? When it causes deep environmental damage, deprives the federal treasury of billions, privileges one industry over others, practically gives away public lands, and hasn’t been significantly altered in almost 150 years.
The law in question is the General Mining Act of 1872, which governs the harvesting of gold, silver, uranium, copper, zinc and other minerals from federal lands. To say it’s long overdue for reform is an understatement.
The law was designed to propel westward advancement. So it did a few things that seem antiquated today.
“It is nearly impossible to prohibit mining under the current framework of the 1872 law, no matter how serious the impacts” — U.S. Forest Service
It exempted hardrock mines from paying a federal royalty on the minerals they took out of the earth, and enshrined a maximum price of $5 per acre for land purchases. It gave mining precedence over other land uses, such as grazing, forestry or conservation. And because environmental protection wasn’t a dominant concern at the time, it made no provisions for safeguarding land and water.
All this made sense in 1872, before Colorado, Montana, Washington and Wyoming were states. It makes no sense today — and the costs of failing to substantially update the law are manifest.
They include billions of dollars in lost royalties from domestic and foreign mining companies. Producers generally pay a royalty of 8 to 12.5 percent to extract coal, oil and gas from federal land.
Why should hardrock miners be excused?
In addition, there are cleanup costs for hundreds of thousands of abandoned mines and polluted waterways, which the Environmental Protection Agency puts at a minimum of $20 billion. And there are the costs of placing mining above all other uses on public lands. As Mike Dombeck, the former head of the U.S. Forest Service, told Congress in 2008, once claims are staked, “It is nearly impossible to prohibit mining under the current framework of the 1872 law, no matter how serious the impacts.”
These costs have long been known, as Dombeck’s words from a decade ago attest. However, industry and congressional opposition to altering the law have combined to make it maddeningly difficult to reform. This may be changing.
Members of Congress from mineral-rich states, including some who sit on powerful resource committees, are looking at the issue. Frustrated by foreign companies extracting royalty-free gold and other hardrocks from American land, troubled by environmental disasters originating from old mines (like the one that turned Colorado’s Animas River a toxic yellow in 2015) and prompted by changing demographics, they are finally moving toward amending the law.
A modest royalty on all large mines would be the place to start. What it would yield is uncertain, partly because government agencies typically collect data on the value of extracted minerals only when they have to calculate royalties. Count this as another plus: Requiring these payments would force broad transparency on the hardrock industry.
In addition, legislation should include tougher environmental rules and new provisions to give non-mining interests — including communities, the forestry, recreation and energy industries and others — greater say in public land decisions. Funds for reclamation and emergency cleanup, which other extractive industries are required to help pay for, would be good as well.
In 1969, Stewart Udall, who served as Interior secretary under Presidents Lyndon Johnson and John F. Kennedy, said that replacing the Mining Act of 1872 was “the most important piece of unfinished business on the nation’s resource agenda.” Fifty years later, it’s still true. The task won’t be easy under the current administration, but the shift of opinion in Congress gives grounds for hope.
