New panel asks: Are state regulators too cozy with mining industry?

By David McGrath Schwartz

Wednesday, Dec. 21, 2011 | 2 a.m.

Nevada has long prided itself for a business-friendly state government, and nowhere is that clearer than with its mining industry.

The state division that oversees mine safety described itself Tuesday as friendly “white hats” compared to federal regulators’ role as fine-levying “black hats.”

Another state agency, the Nevada Commission on Mineral Resources’ Division of Minerals, describes its duty on its website as to “promote, advance and protect mining.”

And the state’s tax department acknowledged it hasn’t yet begun auditing the state’s second-largest mining company, Newmont, after spending the previous two years without a trained auditor to look at any companies’ tax deductions.

The state’s Mining Oversight and Accountability Commission held its first meeting Tuesday, and it received a rundown of agencies’ interactions with the powerful industry and was briefed on proposed regulations to make the industry pay more in taxes.

The Oversight Commission was formed by the 2011 Legislature because of concerns that the industry has suffered from a lack of critical attention from the state. For example, the Department of Taxation did not have a trained auditor in the mining tax for two years, despite an industry that was projected to claim more than $4 billion in tax deductions during the coming two years.

The Commission heard from five agencies on their roles, including the division of industrial relations, which oversees safety. Donald Jayne, administrator of the division, said the agency can shut down a mine or a portion of an operation for unsafe conditions but tries to work with the operators to improve safety. It has shut down one mine, briefly, during the past three years.

Kyle Davis, vice-chairman of the Oversight Commission, questioned why the Division of Minerals describes its role as advancing the industry’s interests.

Alan Coyner, administrator of the Division of Minerals, said he wasn’t aware of that description. But, he said, “We are an advocate for streamlining regulation. We are an advocate for economic development. The state needs mining. It provides jobs and industry.”

The Oversight Commission also heard new proposed limits on tax deductions that would increase taxes paid by mining an estimated $48 million over the next two years. They include preventing mining operations from deducting 100 percent of contracting costs, severance packages for workers and health insurance costs.

State Senate Majority Leader Steven Horsford, D-North Las Vegas, who appointed himself to the commission, said, “I think we’re moving in the right direction here.”

The state is auditing Toronto-based Barrick Gold Corp., the state’s largest mine operator, according to Chris Nielsen, deputy director of the department of taxation.

Five of about 40 auditors on staff are working on the audit.

Horsford, who co-authored the legislation creating the commission, wondered why the department picked Barrick.

Nielsen said it was at the recommendation of gaming regulators, who were consulted because they were accustomed to auditing large companies.

Nielsen said the statute of limitations on the state collecting unpaid taxes is three years, but the department could ask the company to waive that limitation, if necessary.

Senate Bill 493 created the Oversight Commission, but the commission is largely advisory. It has no power to enact regulations or propose legislation. But critics of the industry said it’s needed to bring transparency to the powerful industry.

John Restrepo, who owns a Las Vegas consulting firm, was named by its members as chairman of the commission. He said he believed the commission should give “third-party oversight” to the industry, as the Gaming Control Board and Gaming Commission do to the gambling industry.

Tim Crowley, president of the Nevada Mining Association, said the industry welcomes greater transparency.

“There’s never any harm in oversight by the public,” he said.

Mining came under increased scrutiny during the legislative session because it’s enjoying a boom while the state remains mired in recession. Nevada trails only China, Australia and Russia in gold production.

Some lawmakers, mostly Democrats, saw a piece of the state’s budget solution in squeezing more out of the industry. But since the special tax on mining, called the Net Proceeds on Minerals, is embedded in the state’s constitution, they could only do so at the edges — adjusting deductions and expenses that mines could write off before paying taxes.

The commission was appointed by lawmakers, and Gov. Brian Sandoval is tasked with adding oversight to the major Nevada industry.

Jan Gilbert, a lobbyist with the Progressive Leadership Alliance of Nevada, which has been critical of mining, said she hoped that the commission would gather information about mining that could lead to legislation.

“This could be very useful,” she said.