Some Arizona mining companies could end up digging a bit deeper into their pockets if a U.S.-House-passed bill becomes law, though provisions for new royalty payments might have little effect on the state’s largest copper producer.
All the same, Phoenix-based Freeport-McMoRan Copper and Gold has joined the mining industry in opposing the bill (HR222) in its current form. Freeport-McMoRan acquired Phelps Dodge last year.
Environmental groups back the legislation, which would — for the first time — require royalty payments for hardrock mining on federal land. That includes copper, gold, molybdenum and other metals.
“They are going to have to pay their fair share,” said Sandy Bahr, conservation outreach director for the Sierra Club Grand Canyon Chapter.
The mining industry, however, says the proposed royalties are too high and would discourage further exploration and development.
While Freeport-McMoRan’s Arizona operations are nearly all on private land, the company does hold hardrock claims on Bureau of Land Management and U.S. Forest Service land, the company said in a prepared statement.
Ralph Costa, a BLM mining engineer, says there are some 34,000 mining claims on federal land in Arizona — not counting claims for placer mining, which includes gold panning. But most are not being mined, he added.
“The vast majority of them are held for exploration purposes,” Costa said.
The Hardrock Mining and Reclamation Act (HR2262) passed the U.S. House on Nov. 1 by a 244-166 vote. It would overhaul the Mining Act of 1872.
Under the 135-year-old law, mines do not pay the government for minerals extracted on federal land.
The bill would require royalty payments for new and existing mines, and create a fund to restore land degraded by mining activity. That would include filling in or sealing off abandoned mines. And the bill would require greater attention be paid to the environmental effects of mining.
In addition, it would ban mining patents, which are land titles. With patents, land for mining could be acquired for up to $5 an acre, though they are currently barred by a moratorium going back to the Clinton Administration.
Most Freeport-McMoRan mines operate on land originally acquired through mining patents.
For its part, Arizona has a big stake in the bill, says Madan Singh, director of the Arizona State Department of Mines and Mineral Resources.
“There is quite a bit of mining on federal land in Arizona,” Singh said.
Some 800,000 acres of federal land have mining claims on them, says BLM mining engineer Costa. Overall, he added, more than 20 million acres of federal land could be staked for claims.
In opposing the House bill, Freeport-McMoRan said in a statement it wants reform but added HR2262 would stifle the “U.S. mining industry’s ability to compete globally and would discourage investment in U.S. mining.”
The statement said the company would work with the National Mining Association to make changes to the bill before final passage. It still needs Senate approval. Other than the written statement, Freeport-McMoran declined further comment.
Company spokesman Ken Vaughn referred a reporter an Oct. 29 letter from Kraig Naasz, NMA president and CEO, to House Speaker Nancy Pelosi.
Naasz called the proposed 8 percent royalty for new mines excessive, saying it would be the world’s highest. In addition, Naasz said, a 4 percent royalty for existing mines would upend business plans that had already been made “without this significant cost in mind.”
This would, he said, “virtually guarantee the closure of some mines and the export of high-paying jobs.”
Director Singh of the state mining department said that while Arizona produces two-thirds of the country’s copper, the United States still imports 40 percent of the copper it uses.
The Sierra Club’s Bahr disputed the NMA’s claims, saying the mining companies have had a free ride on public lands for too long.
The 1872 law, Bahr said: “was passed when Ulysses S. Grant was president. The original law was intended to help develop the West, and it’s clear that that has happened.”
Bahr added: “Other industries, like coal, oil and natural gas — they actually do pay royalties.”
Bahr said mining companies make so much money they can afford them as well.
“I don’t see how doing the right thing is an economic disincentive,” she said.
For an example, she cited Resolution Copper Co.  It plans to tap what could be the largest body of copper ore in north America, extracting as much as $144 billion worth of copper at current prices, Bahr said.
“They can afford to give up a little bit in royalties,” she added.
Prices for metals like copper have been rising, but could that could change over time. Resolution’s mine has a 40-year life expectancy.
The company is looking to dig deep for ore in an area that now lies within the Tonto National Forest near Superior. Resolution, however, is working a complex land trade to acquire outright the land atop the deposit. And if it mines on its own property, it would likely not pay royalties.
But the land swap hinges on passage of a separate bill in Congress.
That bill (HR3301) is before the National Parks, Forests and Public Lands Subcomittee, chaired by Rep. Raul Grijalva, D-District 7. Grijalva was an early cosponsor of the mining overhaul bill.
In addition to royalties, the House bill would place more weight on whether new mines would degrade the environment.
“It basically says mining isn’t always the best use of public lands,” Bahr said.
In the NMA letter, Naasz said the proposed act would make it too easy for regulators to stop new projects, even if they meet “environmental and legal requirements.”
The mining interests might get a partial break in the Senate. Majority Leader Harry Reid is from Nevada, the country’s largest gold producer.
A spokesman for Reid told the New York Times that the senator opposes the 4 percent royalty on existing mines, but added the senator called the bill a “step in the right direction.”
Closer to home, the Arizona Game and Fish Commission went on record in support of the bill — as introduced — in a July 19 meeting. Commissioner William McLean told the panel the Governor’s Office supported the bill as well, committee minutes said.
A spokeswoman for the Governor’s Office could not be reached for comment.
As for abandoned mines, the House bill’s reclamation fund could go toward covering up some of the 100,000 said to exist in Arizona. Many have open shafts up to hundreds of feet deep.
In September, a 13-year-old Kingman girl was killed when the all-terrain vehicle she was riding on plunged into a 125-foot shaft.
State Mine Inspector Joe Hart campaigned on closing up abandoned mines, but he says the House bill could do as much harm as good.
The royalties could force the closure of smaller, marginal mining operations, he said.
“It’s sort of a bittersweet deal,” Hart said. “I’d love to see a little money coming into the abandoned mine fund, but not at the expense of losing jobs.”