United, in mining’s camp

Lisa Mascaro, Sun Washington Bureau

Wednesday, Oct. 31, 2007 | 7:33 a.m.

In warp speed House Democrats are moving forward on the most sweeping changes ever to the 1872 Mining Law, and Nevada's House delegation has moved just as swiftly to form a unified front against it.

A vote is expected this week on a massive rewrite of the law that would for the first time impose a royalty on minerals pulled from federal lands while also tightening environmental restrictions on the development and operation of hard-rock mines.

Under the bill, an estimated $40 million annually or more could be generated for abandoned mine cleanup, primarily in Nevada.

But even as Nevada stands to gain federal revenue from an 8 percent gross federal royalty, the state's three representatives plan to vote against the bill , which they believe would do more harm than good for Nevada's No. 2 industry.

The sameness of their arguments can be stunning.

Republican Rep. Dean Heller, who is leading the fight as the lawmaker whose district includes more metal mines than any other in the nation, says if you put an 8 percent tax on mines, then it's only a matter of time before gold prices dip and companies shut down.

Many experts agree, and have suggested a smaller royalty.

But Heller's opposition goes further. He and the rest of the state's House delegation - and the mining industry - want the federal legislation to adopt the Nevada mining tax model, which imposes a net-profit tax rather than gross.

Heller's proposal for a 5 percent net-profit tax was shot down in committee last week, but he is trying with some success to get it heard before the full House this week. Critics say the loopholes allowed under the net model are so huge that companies in Nevada end up writing off their entire operations and paying less than 1 percent of their profit as taxes.

Is that fair?

"Absolutely," Heller said Tuesday in the Capitol.

"It's creating jobs. We have an economy in Nevada that relies on it," he said. "Can you imagine if you put all these mining companies out of business, and what the impacts are going to be?"

Environmentalists argue that it's not taxpayers' problem if a company operated in an unprofitable way - they still owe taxes for pulling minerals from public lands. Democratic Rep. Shelley Berkley disagrees.

"If they made zero, what do you want to extract from them?" Berkley said. "It would be the taxpayers' problem if (the mines) closed up operations because they are not making any profit and they have to sell assets in order to pay their taxes," she said. "It's more than jobs. It's the entire economic base of particular areas of our state that would simply fail to continue to exist if it wasn't for the mining industry.

"I understand taxing profits and paying for the privilege of doing business," she said, "but having them pay taxes to the point where they're closing up shop doesn't seem like a very sound argument."

Republican Rep. Jon Porter opposes the bill flat out as just "another tax increase on Americans."

"At the end of the day, that tax increase is going to be paid by you and your family and friends and neighbors because, in the end, the cost is passed on to consumers," said Porter, who also said he would support using the Nevada tax model.

Nevada's representatives have received more than $150,000 in campaign contributions from the mining industry since they were elected to Congress, according to the Center for Responsive Politics, which compiles industry donations. Porter leads the delegation with $74,750 in contributions - and ranks among the industry's top 20 beneficiaries in the House. Berkley received $61,000, and Heller, first elected last fall, has received $14,250.

If the House passes the bill this week, the debate will just be beginning as it heads to the Senate. Majority Leader Harry Reid, who with Republican Sen. John Ensign opposes elements of the House bill, is working with other senators to craft a companion bill.