State bill’s ramifications divide mining industry

By Anjeanette Damon

Tuesday, April 12, 2011 | 2:01 a.m.

A concession made by the Nevada Mining Association to help state lawmakers close a budget deficit last year has opened an ugly rift in the mining industry that could have ramifications for this session’s budget debate.

The rift — between mineral exploration companies and mining operators — stems from the association’s agreement during last year’s special session to increasing mining claims fees by $25 million to help plug a hole in the current fiscal year’s budget.

It’s all expected to come to a head today in a hearing on Senate Bill 492, which would largely reverse the fee increase. The bill is backed by a newly formed association of mining exploration companies that are bearing the brunt of that fee increase — one they say they didn’t agree to during the special session.

“This is taxation without representation,” said Debra Struhsacker, a lobbyist for the Nevada Mineral Resources Alliance. “We weren’t at the table.”

Struhsacker argues the special session deal was struck with lobbyists for large gold production companies such as Barrick and Newmont without input from the mineral exploration companies she represents.

Those exploration companies, which prospect for mineral deposits they can either sell to a production company or mine themselves, hold hundreds of claims at a time as they search for a viable deposit.

“They are the research and development arm of the industry but they aren’t generating any revenue,” she said.

Her association has come up with an alternative that would push a larger share of the fee increases to companies mining minerals, such as Barrick and Newmont. She argues the companies making a profit from the minerals should pay the fees.

But the bill would reduce the state’s income — revenue lawmakers had counted on to plug this year’s budget hole.

Sen. Sheila Leslie, D-Reno, who has been an outspoken critic of the mining industry and thinks it should pay more in taxes, has sided with the exploration companies. As chairwoman of the Senate Revenue Committee, she introduced SB492.

She acknowledges it would cut taxes for the mining companies, but argues the way the fee increase was structured it wouldn’t draw in the anticipated revenue.

“Companies will just drop their claims before it’s time to pay up,” she said.

“The decision made in the special session was far too hasty and resulted in a disincentive for exploration. It didn’t even have a hearing.”

Mining industry lobbyists don’t disagree that the exploration companies weren’t well represented. Companies such as Barrick and Newmont have invested heavily in lobbying efforts for decades.

Newmont lobbyist Jim Wadhams said he plans to take a neutral position on the bill today, but said the company questions why lawmakers would want to return money to the industry that’s needed to fill a deficit in state coffers.

“It reduces the amount of money that we’re obligated to pay,” he said. “It’s not what we were asked to do (in the special session), and it’s not what we agreed to do.”

Industry lobbyists have tried to deflect calls this session to raise mining’s taxes, in part, by pointing out they came to the table last year and agreed to the fee increase. Opposing SB492 would look like they are seeking a tax cut and wouldn’t help their public relations effort.

“We didn’t like that bill, and we didn’t ask for it,” said Tim Crowley, president of the Nevada Mining Association. “But we ultimately agreed to it. We feel we needed to do something and that’s what the Legislature picked.”

Anger over that agreement, however, has resulted in mining exploration companies pushing operators to accept lawmakers’ efforts to reduce the deductions operators are able to take against their net proceeds tax.

Laura Granier, a lobbyist for Midway Gold, said mining operators are creating a hostile business environment by opposing a tax increase that is popular with the public. Mining companies are enjoying record profits as the price of gold is at an all-time high when the rest of the economy is suffering.

“We want to go back to the times when mining was a good thing, when we were a partner with the state, when we were an industry the public supported,” Granier said. “When you have this whole dialogue that Nevada hates mining, it’s detrimental to the industry.”

Crowley argued the industry has never been anti-tax, but it opposes efforts to change the deductions.

“We are not anti-tax,” he said. “We weren’t when we agreed to pay this fee. We weren’t in 2008 when they asked us to prepay our net proceeds and weren’t in 2003 when they asked for the modified business tax. Our willingness to try to help is evident.”