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Number of Abandoned Mine Sites and Hazards' which was released on July
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Testimony:
Before the Committee on Energy and Natural Resources, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Tuesday, July 14, 2009:
Hardrock Mining:
Information on State Royalties and the Number of Abandoned Mine Sites
and Hazards:
Statement of Robin M. Nazzaro, Director:
Natural Resources and Environment:
GAO-09-854T:
GAO Highlights:
Highlights of GAO-09-854T, a testimony before the Committee on Energy
and Natural Resources, U.S. Senate.
Why GAO Did This Study:
The General Mining Act of 1872 helped open the West by allowing
individuals to obtain exclusive rights to mine billions of dollars
worth of gold, silver, and other hardrock (locatable) minerals from
federal lands without having to pay a federal royalty. However, western
states charge royalties so that they share in the proceeds from the
hardrock minerals extracted from their lands. For years, some mining
operators abandoned land used in their mining operations, creating
environmental and physical safety hazards. To curb further growth in
the number of abandoned hardrock mines on federal lands, in 1981, the
Department of the Interior’s Bureau of Land Management (BLM) began
requiring mining operators to reclaim BLM land disturbed by these
operations.
What GAO Found:
Twelve western states that GAO reviewed assess royalties on hardrock
mining operations on state lands. The 12 western states are Alaska,
Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oregon, Utah, Washington, and Wyoming. In addition, each of these
states, except Oregon, assesses taxes that function like a royalty,
which GAO refers to as functional royalties, on the hardrock mining
operations on private, state, and federal lands. The royalties the
states assess often differ depending on land ownership and the mineral
being extracted. For example, for private mining operations conducted
on federal, state, or private land, Arizona assesses a functional
royalty of 1.25 percent of net revenue on gold mining operations, and
an additional royalty of at least 2 percent of gross value for gold
mining operations on state lands. The actual amount assessed for a
particular mine may depend not only on the type of royalty, its rate,
and exclusions, but also on other factors, such as the mine’s location
relative to markets.
To estimate abandoned hardrock mine sites in the 12 western states and
South Dakota, we developed a standard definition for these mine sites
and asked the states to report the number of mine sites and estimate
the number of features at these sites that pose physical safety hazards
and the number of sites with environmental degradation. Using this
definition that GAO provided, states reported that there are at least
161,000 abandoned hardrock mine sites in their states, and these sites
have at least 332,000 features that may pose physical safety hazards
and at least 33,000 sites that have degraded the environment.
Figure: An Abandoned Mine Shaft in Oregon on BLM Land:
[Refer to PDF for image: photograph]
Source: BLM.
[End of figure]
What GAO Recommends:
This testimony focuses on the (1) royalties states charge and (2)
number of abandoned hardrock mine sites and hazards. It presents
information from two GAO reports: Hardrock Mining: Information on
Abandoned Mines and Value and Coverage of Financial Assurances on BLM
Land, [hyperlink, http://www.gao.gov/products/GAO-08-574T] (March 12,
2008) and Hardrock Mining: Information on State Royalties and Trends in
Imports and Exports, [hyperlink, http://www.gao.gov/products/GAO-08-
849R] (July 21, 2008). GAO, among other steps, reviewed state statutes
and regulations on royalties on hardrock mining operations and asked 12
western states and South Dakota to provide information on the number of
abandoned mine sites and associated features in their states using a
consistent definition.
View [hyperlink, http://www.gao.gov/products/GAO-854T] or key
components. For more information, contact Robin M. Nazzaro at (202) 512-
3841 or nazzaror@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss our 2008 work on state
royalties on hardrock minerals and the number of abandoned hardrock
sites and hazards--two issues that are central to the debate on
reforming the General Mining Act of 1872.[Footnote 1]
As you know, since the passage of the General Mining Act of 1872, mine
operators have extracted billions of dollars worth of silver, gold,
copper, and other hardrock (locatable) minerals from federal lands
without having to pay a royalty.[Footnote 2] Most of these lands are
managed by the Department of the Interior's Bureau of Land Management
(BLM) and the U.S. Department of Agriculture's Forest Service.
Assessing a royalty on hardrock minerals could compensate the public
for hardrock minerals extracted from federal lands, as more recently
enacted laws require for oil, gas, and other minerals.
The vast majority of the federal lands where hardrock mining operations
occur are in 12 western states.[Footnote 3] These western states have
statutes governing hardrock mining operations on lands in their state.
However, unlike the federal government, these states charge royalties
that allow them to share in the proceeds from hardrock minerals
extracted from state-owned lands. In addition, most of these states
charge taxes, such as severance taxes, mine license taxes, or resource
excise taxes, on hardrock mining operations that occur on private,
state, and federal lands. For the purposes of this report, we use the
term "functional royalty" to refer to taxes that function like a
royalty in that they permit the state to share in the value of the
mine's production. Although states may use similar names for the
functional royalties they assess, there can be wide variations in their
forms and rates.
In addition to the lack of a requirement for hardrock mining operators
to pay royalties, prior to 1981, BLM did not require them to reclaim
the federal land they used. Consequently, hardrock mining operators
have left thousands of acres of federal land disturbed through mineral
exploration, mining, and mineral processing. Some of these disturbed
abandoned mine lands pose serious environmental and physical safety
hazards. These hazards include environmental hazards such as toxic or
acidic water that contaminates soil and groundwater or physical safety
hazards such as open or concealed shafts, unstable or decayed mine
structures, or explosives. Cleanup costs for these abandoned mines vary
by type and size of the operation.[Footnote 4]
My testimony today focuses on the (1) royalties states currently charge
on hardrock mining operations and (2) number of abandoned hardrock mine
sites and number of associated hazards.
To address these objectives, we interviewed staff at BLM and the Forest
Service; examined agency documents and data; and reviewed relevant
legislation and regulations. To identify the types of royalties,
including functional royalties, that the 12 western states assess on
hardrock mining operations, we reviewed state statutes and regulations,
as of March 2008, pertaining to royalties on hardrock mining
operations. To aid in understanding general patterns in state
royalties, we consulted academic and industry sources and then we
categorized each royalty according to how it is assessed. To assess the
number of abandoned hardrock mine sites, we asked the 12 western states
and South Dakota[Footnote 5]--which have significant numbers of
abandoned hardrock mining operations--to determine the number of these
mine sites in their states. We asked the states to use a consistent
definition, which we provided, in estimating the number of abandoned
mine sites and associated features that pose a significant hazard to
public health and safety and the number of sites that cause
environmental degradation.[Footnote 6] We specified that states should
only include hardrock (also known as locatable), non-coal sites in this
estimate. From these data, we estimated the number of features that
pose physical safety hazards and the number of sites with environmental
hazards in the 12 western states and South Dakota. We also summarized
six selected studies by federal agencies and organizations to document
differences in estimates, definitions, and methodologies. This
testimony is based on prior GAO reports whose work was conducted in
accordance with generally accepted government auditing standards.
[Footnote 7]
The 12 Western States Assess Multiple Types of Royalties, with
Differences in Types and Rates Based on the Mineral Extracted and Land
Ownership:
Twelve western states assess royalties on the hardrock mining
operations on state lands. In addition, each of these states, except
Oregon, assesses taxes that function like a royalty, which we refer to
as functional royalties, on the hardrock mining operations on private,
state, and federal lands. To aid in the understanding of royalties,
including functional royalties, the royalties are grouped as follows:
* Unit-based is typically assessed as a dollar rate per quantity or
weight of mineral produced or extracted, and does not allow for
deductions of mining costs.
* Gross revenue is typically assessed as a percentage of the value of
the mineral extracted and does not allow for deductions of mining
costs.
* Net smelter returns is assessed as a percentage of the value of the
mineral, but with deductions allowed for costs associated with
transporting and processing the mineral (typically referred to as mill,
smelter, or treatment costs); however, costs associated with extracting
the mineral are not deductible.
* Net proceeds is assessed as a percentage of the net proceeds (or net
profit) of the sale of the mineral with deductions for a broad set of
mining costs. The particular deductions allowed vary widely from state
to state, but may include extraction costs, processing costs,
transportation costs, and administrative costs, such as for capital,
marketing, and insurance.[Footnote 8]
Royalties, including functional royalties, often differ depending on
land ownership and the mineral being extracted, as the following
illustrates:
* For private mining operations conducted on federal, state, or private
lands, Arizona assesses a net proceeds functional royalty of 1.25
percent on gold mining operations, and an additional gross revenue
royalty of at least 2 percent for gold mining operations on state
lands.
* Nine of the 12 states assess different types of royalties for
different types of minerals. For example, Wyoming employs three
different functional royalties for all lands: (1) net smelter returns
for uranium, (2) a different net smelter returns for trona--a mineral
used in the production of glass, and (3) gross revenue for all other
minerals.
Furthermore, the royalties the states assess often differ in the
allowable exclusions, deductions, and limitations. For example, in
Colorado, a functional royalty on metallic mining excludes gross
incomes below $19 million,[Footnote 9] whereas in Montana a functional
royalty on metallic mining is applied on all mining operations after
the first $250,000 of revenue.[Footnote 10]
Finally, the actual amount assessed for a particular mine may depend
not only on the type of royalty, its rate, and exclusions, but also on
such factors as the mineral's processing requirements, mineral markets,
mine efficiency, and mine location relative to markets, among other
factors.
Appendix I contains information on royalties the 12 western states
assess on hardrock mining operations, with details on rates, royalty
type, and deductions and limitations.
Using a Consistent Definition, States Reported at Least 161,000
Abandoned Hardrock Mine Sites, with Many Posing Hazards:
To estimate abandoned hardrock mine sites in the 12 western states and
South Dakota, we developed a standard definition for these mine sites.
[Footnote 11] In developing this definition, we consulted with mining
experts at the National Association of Abandoned Mine Land Programs;
the Interstate Mining Compact Commission; and the Colorado Department
of Natural Resources, Division of Reclamation, Mining and Safety,
Office of Active and Inactive Mines. We defined an abandoned hardrock
mine site as a site that includes all associated facilities,
structures, improvements, and disturbances at a distinct location
associated with activities to support a past operation, including
prospecting, exploration, uncovering, drilling, discovery, mine
development, excavation, extraction, or processing of mineral deposits
locatable under the general mining laws. We also asked the states to
estimate the number of features at these sites that pose physical
safety hazards and the number of sites with environmental degradation.
Using this definition, states reported to us the number of abandoned
sites on all lands in their states and we calculated a total of at
least 161,000 abandoned hardrock mine sites in their states. At these
sites, on the basis of state data, we estimated that at least 332,000
features may pose physical safety hazards, such as open shafts or
unstable or decayed mine structures. Furthermore, we estimated that at
least 33,000 sites have degraded the environment, by, for example,
contaminating surface and ground water or leaving arsenic-contaminated
tailings piles.[Footnote 12] Table 1 shows our estimate of the number
of abandoned hardrock mine sites in the 12 western states and South
Dakota, the number of features that pose significant public health and
safety hazards, and the number of sites with environmental degradation.
Table 1: State Estimates of the Number of Abandoned Hardrock Mine
Sites, Features That Pose Significant Public and Safety Hazards, and
Sites With Environmental Degradation, in 12 Western States and South
Dakota, as of October 1, 2007:
State: Alaska;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 469;
Estimated number of features that pose a significant hazard to public
health and safety: 235;
Estimated number of sites with environmental degradation: 99.
State: Arizona;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 50,000;
Estimated number of features that pose a significant hazard to public
health and safety: 59,400;
Estimated number of sites with environmental degradation: 9,900.
State: California;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 47,084;
Estimated number of features that pose a significant hazard to public
health and safety: 164,795;
Estimated number of sites with environmental degradation: 5,200.
State: Colorado;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 7,300;
Estimated number of features that pose a significant hazard to public
health and safety: 17,000;
Estimated number of sites with environmental degradation: 150.
State: Idaho;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 7,100;
Estimated number of features that pose a significant hazard to public
health and safety: Not reported;
Estimated number of sites with environmental degradation: Not reported.
State: Montana;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 6,000;
Estimated number of features that pose a significant hazard to public
health and safety: 6,000-22,000;
Estimated number of sites with environmental degradation: 331.
State: Nevada;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 16,000;
Estimated number of features that pose a significant hazard to public
health and safety: 51,000;
Estimated number of sites with environmental degradation: 150.
State: New Mexico;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 800;
Estimated number of features that pose a significant hazard to public
health and safety: 15,000;
Estimated number of sites with environmental degradation: 200-300.
State: Oregon;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 3,823;
Estimated number of features that pose a significant hazard to public
health and safety: Not reported;
Estimated number of sites with environmental degradation: 140.
State: South Dakota;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 950;
Estimated number of features that pose a significant hazard to public
health and safety: Not reported;
Estimated number of sites with environmental degradation: Not reported.
State: Utah;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 17,000;
Estimated number of features that pose a significant hazard to public
health and safety: 17,000;
Estimated number of sites with environmental degradation: 17,000.
State: Washington;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 3,629;
Estimated number of features that pose a significant hazard to public
health and safety: 1,608;
Estimated number of sites with environmental degradation: 50.
State: Wyoming;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 956;
Estimated number of features that pose a significant hazard to public
health and safety: 519;
Estimated number of sites with environmental degradation: 437.
State: Total;
Estimated number of abandoned hardrock (non-coal, locatable) mine
sites: 161,111;
Estimated number of features that pose a significant hazard to public
health and safety: 332,557-348,557;
Estimated number of sites with environmental degradation: 33,657-
33,757.
Source: GAO analysis of state-reported data.
Notes: While states used our definition to provide data on the
estimated number of mine sites and features, these data have two key
limitations: (1) the methods and sources used to identify and confirm
abandoned sites and hazardous features vary substantially by state and
(2) states have markedly different data systems and requirements for
recording data on abandoned mines. For complete information on these
limitations, see GAO-08-574T.
[End of table]
Regarding federal lands, BLM and the Forest Service have had difficulty
determining the number of abandoned hardrock mines on the lands they
manage. In September 2007, the agencies reported an estimated 100,000
abandoned mine sites,[Footnote 13] but we found problems with this
estimate. For example, the Forest Service had reported that it had
approximately 39,000 abandoned hardrock mine sites on its lands.
However, this estimate includes a substantial number of non-hardrock
mines, such as coal mines, and sites that are not on Forest Service
land. At our request, the Forest Service provided a revised estimate of
the number of abandoned hardrock mine sites on its lands, excluding
coal or other non-hardrock sites. According to this estimate, the
Forest Service may have about 29,000 abandoned hardrock mine sites on
its lands. That said, we still have concerns about the accuracy of the
Forest Service's recent estimate because it identified a large number
of sites with "undetermined" ownership, and therefore these sites may
not all be on Forest Service lands.
BLM has also acknowledged that its estimate of abandoned hardrock mine
sites on its lands may not be accurate because it includes sites on its
lands that are of unknown or mixed ownership (state, private, and
federal) and a few coal sites. In addition, BLM officials said that the
agency's field offices used a variety of methods to identify sites in
the early 1980s, and the extent and quality of these efforts varied
greatly. For example, they estimated that only about 20 percent of BLM
land has been surveyed in Arizona. Furthermore, BLM officials said that
the agency focuses more on identifying sites closer to human habitation
and recreational areas than on identifying more remote sites, such as
in the desert. Table 2 shows the Forest Service's and BLM's most recent
available estimates of abandoned mine sites on their lands.
Table 2: BLM's and the Forest Service's Most Currently Available
Estimated Number of Abandoned Mines on Their Lands, by State:
State: Alaska;
Estimated number of abandoned mine sites on BLM land[A]: 6,000;
Estimated number of abandoned mine sites on Forest Service land[B]:
830;
Total: 6,830.
State: Arizona;
Estimated number of abandoned mine sites on BLM land[A]: 22,000;
Estimated number of abandoned mine sites on Forest Service land[B]:
2,183;
Total: 24,183.
State: California;
Estimated number of abandoned mine sites on BLM land[A]: 11,500;
Estimated number of abandoned mine sites on Forest Service land[B]:
6,248;
Total: 17,748.
State: Colorado;
Estimated number of abandoned mine sites on BLM land[A]: 2,500;
Estimated number of abandoned mine sites on Forest Service land[B]:
2,605;
Total: 5,105.
State: Idaho;
Estimated number of abandoned mine sites on BLM land[A]: 400;
Estimated number of abandoned mine sites on Forest Service land[B]:
4,635;
Total: 5,035.
State: Montana;
Estimated number of abandoned mine sites on BLM land[A]: 1,016;
Estimated number of abandoned mine sites on Forest Service land[B]:
3,899;
Total: 4,915.
State: Nevada;
Estimated number of abandoned mine sites on BLM land[A]: 9,000;
Estimated number of abandoned mine sites on Forest Service land[B]:
1,613;
Total: 10,613.
State: New Mexico;
Estimated number of abandoned mine sites on BLM land[A]: 3,000;
Estimated number of abandoned mine sites on Forest Service land[B]:
989;
Total: 3,989.
State: Oregon;
Estimated number of abandoned mine sites on BLM land[A]: 3,400;
Estimated number of abandoned mine sites on Forest Service land[B]:
2,427;
Total: 5,827.
State: South Dakota;
Estimated number of abandoned mine sites on BLM land[A]: Not reported;
Estimated number of abandoned mine sites on Forest Service land[B]:
503;
Total: 503.
State: Utah;
Estimated number of abandoned mine sites on BLM land[A]: 10,000;
Estimated number of abandoned mine sites on Forest Service land[B]:
697;
Total: 10,697.
State: Washington;
Estimated number of abandoned mine sites on BLM land[A]: Not reported;
Estimated number of abandoned mine sites on Forest Service land[B]:
1,956; Total: 1,956.
State: Wyoming;
Estimated number of abandoned mine sites on BLM land[A]: 2,000;
Estimated number of abandoned mine sites on Forest Service land[B]:
336;
Total: 2,336.
State: Total;
Estimated number of abandoned mine sites on BLM land[A]: 70,816;
Estimated number of abandoned mine sites on Forest Service land[B]:
28,921;
Total: 99,737.
Source: GAO analysis of BLM and Forest Service data.
[A] These data are from BLM's Abandoned Mine Land Inventory and
Remediation Report, BLM/NV/GI-97/004, November 1996.
[B] These data are from the U.S. Geological Survey's analysis of data
in the Mineral Resources Data System (of which the Mineral Availability
System/Mineral Industry Locator System is now a part), revised by the
Forest Service as of November 2007.
[End of table]
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or Members of the Committee may have.
Contact and Staff Acknowledgments:
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this testimony. For further
information about this testimony, please contact Robin M. Nazzaro,
Director, Natural Resources and Environment (202) 512-3841 or
Nazzaror@gao.gov. Key contributors to this testimony were Andrea
Wamstad Brown (Assistant Director); Jeffrey B. Barron; Elizabeth
Beardsley; Casey L. Brown; Kristen Sullivan Massey; Rebecca Shea; and
Carol Herrnstadt Shulman.
[End of section]
Appendix I: Types of Royalties, Including Functional Royalties,
Assessed on Hardrock Mining Operations in 12 Western States:
Table 3: Alaska:
Alaska: State lands; Production royalty[A];
Type of mines/minerals assessed: Minerals locatable under U.S. General
Mining Act (excludes coal, sodium, potassium, oil, and gas) extracted
from mining claims, leaseholds, or leases on state land;
Type of royalty: Modified net proceeds; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 3%; Base: Mine's net
income;
Royalty deductions and limitations: Deductions: Overhead and operating
expenses, development costs properly charged to expense, depreciation,
some taxes, losses sustained, among other things; Limitations: Subject
to exploration incentive credit.
Alaska: All lands; Alaska: Mining license tax[B];
Type of mines/minerals assessed: Valuable metals, ores, minerals,
asbestos, gypsum, coal, marketable earth, or stone (but not oil and
gas) extracted from all mines (including that on federal, state, and
private lands);
Type of royalty: Modified net proceeds; Rate determination: Statutory;
Royalty rate: Rate type: Progressive; Current rate: 3% to 7%; Base:
Taxpayer's net income from all mines in state, less depletion;
depletion is percentage that varies by mineral;
Royalty deductions and limitations: Deductions: Overhead and operating
expenses, development costs properly charged to expense, depreciation,
some taxes, losses sustained, among other things; Limitations:
Exemption for first 3.5 years of new mine; subject to exploration
incentive credit.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Alaska Stat. § 38.05. 185, § 38.05.212, § 27.30, § 43.65; Alaska
Admin. Code tit. 11, § 86, art. 9; Alaska Admin. Code tit. 11, §
86.760.
[B] Alaska Stat. §§ 43.65.010, 43.65.060 (definitions) 27.30.030;
Alaska Admin. Code tit. 15, § 65.
[End of table]
Table 4: Arizona:
Arizona: State lands: Royalty--minerals[A];
Type of mines/minerals assessed: All metallic ore minerals and
industrial minerals other than common variety minerals (e.g., stone,
gravel, clay, sand) extracted from state lands;
Type of royalty: Gross revenue royalty with reference price; Rate
determination: Statute delegates determination to the State Land
Commissioner, subject to statutory standard and minimum;
Royalty rate: Rate type: Case by case; Current rate: Market royalty
rate; at least 2% of gross value; Base: Gross value determined by
quantity and published prices (or, where unavailable, appraisal of fair
market price). Where processing is performed after the mineral is
extracted, the mineral shall be deemed produced and sold when the
concentrate or cathode results from that processing;
Royalty deductions and limitations: Deductions: None specified in law
or regulation; Limitations: None identified in statute or regulation.
Arizona: All lands: Severance tax--metallic minerals[B];
Type of mines/minerals assessed: Metalliferous minerals ("copper, gold,
silver, molybdenum or other metal or any ore or substance containing
such metals including turquoise") extracted from federal, state or
private land;
Type of royalty: Net proceeds royalty; Rate determination: Statutory;
Royalty rate: Rate type: Uniform rate; Current rate: 2.5% on net
severance base (effectively 1.25% of net revenue); Base: Net severance
base is 50% of difference between gross value of production and
production costs. Gross value of production is the sale price (or price
from last period, if no sale) multiplied by the number of recoverable
units of the mineral;
Royalty deductions and limitations: Deductions: Production costs;
generally the costs incurred in mining and processing until the point
of sale (e.g., primary crusher, reduction works, or delivery of leach
liquor to precipitation or solvent extraction facility); includes
depreciation and property taxes; does not include severance tax and
depletion, as well as corporate expenses and income tax (e.g., these
are not deductible); Limitations: None identified in statute or
regulation.
Arizona: All lands: Transaction privilege tax--mining
classification[C];
Type of mines/minerals assessed: Oil, natural gas, limestone, sand,
gravel, or any other nonmetalliferous mineral product extracted from
all lands; applies to persons in the business of mining, quarrying, or
producing for sale, profit, or commercial use any nonmetalliferous
mineral product;
Type of royalty: Modified gross revenue royalty; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform rate; Current rate: 3-1/8% of the tax
base; Base: The tax base is the "gross proceeds of sales or gross
income derived from the business," "the value of the entire product
mined, quarried or produced for sale, profit or commercial use in this
state"[D];
Royalty deductions and limitations: Deductions: Municipal and Indian
sales taxes; Limitations: None identified in statute or regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Ariz. Rev. Stat. § 27-231 et seq.
[B] Ariz. Rev. Stat. § 42-5201 to -5204; gross proceeds or income from
retail sales are not subject to the Severance Tax, but are taxed under
the Transaction Privilege Tax.
[C] Ariz. Rev. Stat. §§ 42-5010, 42-5072, 42-5001-02; sales that are
taxed under the retail classification (5 percent) are not subject to
the mining classification tax.
[D] "Gross income" means the gross receipts of a taxpayer derived from
trade, business, commerce, or sales of tangible personal property or
services. "Gross proceeds of sales" means the value proceeding or
accruing from the sale of tangible personal property without any
deduction on account of the cost of property sold, expense of any kind,
or losses. Retail tax does not apply to sale of precious metal bullion
or monetized bullion.
[End of table]
Table 5: California:
California: State lands: Production royalty[A];
Type of mines/minerals assessed: Minerals except oil, gas, and other
hydrocarbons extracted from leases and prospecting permits on state
lands;
Type of royalty: Modified gross revenue royalty or net proceeds
royalty; Rate determination: Statute delegates choice of type and rate
determination, subject to a minimum, to State Land Commission;
Royalty rate: Rate type: Case by case; Current rate: (1) Preferential
lease. At the option of the Commission, either (a) a royalty, in money
or in kind, of not less than 10% of the gross value of all mineral
production from the leased lands, or (b) a percentage, to be determined
by the Commission, of the net profits derived from mineral extraction
operations under the lease. (2) Negotiated leases. At the option of the
Commission, "a royalty in money or in kind or a percentage of the net
profits." (3) Competitively bid leases. Bidding on the basis of "cash
bonus, royalty rate, net profit, or other single biddable factor.";
Base: Gross value or net profits (except for competitively bid leases)
(the terms are not defined in the code or in regulations);
Royalty deductions and limitations: Deductions: For gross value,
approved charges associated with transporting or processing the state's
share; Limitations: None identified in statute or regulation.
California: All lands: Fee on gold and silver[B];
Type of mines/minerals assessed: Gold and silver extracted from all
lands;
Type of royalty: Unit-based royalty; Rate determination: Statutory;
Royalty rate: Rate type: Uniform rate; Current rate: $5 per ounce gold,
$0.10 per ounce silver; Base: Ounces of gold/silver mined;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Cal. Pub. Res. Code § 6895-97; Royalties are also assessed on any
minerals extracted under a prospecting permit (prior to a lease). The
permit royalty is 20 percent.
[B] Cal. Pub. Res. Code § 2207(d)(4)(b)(i); Cal. Code Regs. tit. 14, §
3698.
[End of table]
Table 6: Colorado:
Colorado: State lands: Royalty--general; gems, specimens, and placer
minerals[A];
Type of mines/minerals assessed: All minerals; includes construction
materials, natural oil and gas, oil shale, coal, and geothermal
resources;
Type of royalty: Gross revenue royalty; Rate determination: Statute
delegates to Board of Land Commissioners ("such royalty upon the
product as the board may determine");
Royalty rate: Rate type: Case by case; generally uniform for gems
category; Current rate: No general rate; gems, specimens, and placer
minerals, 7%; Base: Gross revenue of mineral at the mine;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Colorado: State lands: Royalty--gold and silver[B];
Type of mines/minerals assessed: Gold and silver extracted from state
lands;
Type of royalty: Either gross revenue or net proceeds; Rate
determination: Statute delegates to Board of Land Commissioners ("such
royalty upon the product as the board may determine");
Royalty rate: Rate type: Uniform; Current rate: 5% of gross value or
10% of net value; Base: Either gross value or net value;
Royalty deductions and limitations: Deductions: For gross value, none
identified in statute or regulation; for net value, as specified in
lease; Limitations: None identified in statute or regulation.
Colorado: State lands: Royalty--uranium[C];
Type of mines/minerals assessed: Uranium extracted from state lands;
Type of royalty: Gross revenue royalty; Rate determination: Statute
delegates to Board of Land Commissioners ("such royalty upon the
product as the board may determine");
Royalty rate: Rate type: Progressive; Current rate: 5% to over 12%
depending on the published price per pound of yellowcake (U3O8); rate
increases as price increases; Base: Gross value;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Colorado: All lands: Severance tax--metallic minerals[D];
Type of mines/minerals assessed: Metallic minerals; all minerals except
molybdenum, oil, gas, coal, oil shale, rock, sand, gravel, stone
products, earths, limestone, carbon dioxide, dolomite extracted from
all mines/lands;
Type of royalty: Modified gross revenue royalty[F]; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform rate above income exclusion; Current
rate: 2.25%; Base: Gross income above $19M/year. Gross income is "the
value of ore immediately after its removal from the mine, and does not
include any value added subsequent to mining by any treatment
processes";
Royalty deductions and limitations: Deductions: Any value added after
mining (e.g., crushing, transportation, etc.); Limitations: Subject to
credit for amount of the royalty, up to 50% of the severance tax.
Colorado: All lands: Severance tax--molybdenum[E];
Type of mines/minerals assessed: Molybdenum ore extracted from all
mines/lands;
Type of royalty: Unit-based royalty; Rate determination: Statutory;
Royalty rate: Rate type: Uniform above exclusion; Current rate: $0.05
per ton above 625,000 tons per quarter; Base: Not applicable;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Colo. Rev. Stat. § 36-1-113 and correspondence, State of Colorado,
Mar. 27, 2008.
[B] Colo. Rev. Stat. § 36-1-113 and correspondence, State of Colorado,
Mar. 27, 2008.
[C] Colo. Rev. Stat. § 36-1-113 and correspondence, State of Colorado,
Mar. 27, 2008.
[D] Colo. Rev. Stat. § 39-29-102, 103.
[E] Colo. Rev. Stat. § 39-29-102, 104.
[F] The gross revenue royalty can function much like a net smelter
returns royalty depending on how the gross revenue is measured and the
deductions allowed.
[End of table]
Table 7: Idaho:
Idaho: State lands: Royalty--general[A];
Type of mines/minerals assessed: Phosphate, sodium, asbestos, gold,
silver, lead, zinc, copper, antimony, geothermal resources, and all
other minerals extracted from state lands;
Type of royalty: Net smelter returns royalty (most minerals); Rate
determination: Statute delegates to Board of Land Commissioners subject
to standard of "fair and in the interest of the state," with a
statutory minimum of 2.5%;
Royalty rate: Rate type: Uniform; Current rate: 5%; Base: Value of
mineral produced and saved; market value or actual price, whichever is
higher; gross receipts earned or received at point of sale of first
marketable minerals;
Royalty deductions and limitations: Deductions: Reasonable
transportation costs to closest feasible point of sale, smelter or
treatment costs for material that requires additional processing to
obtain marketable minerals after being mined and removed from leased
land; Limitations: Rental payments are credited toward the royalties.
Idaho: State lands: Royalty--riverbed mineral leases[B];
Type of mines/minerals assessed: Gold extracted from submerged state
lands;
Type of royalty: Gross revenue royalty; Rate determination: Statute
delegates to Board of Land Commissioners subject to standard of "fair
and in the interest of the state," with a statutory minimum of 2.5%;
Royalty rate: Rate type: Uniform; Current rate: 5%; Base: Value of
mineral produced and saved; market value or actual price, whichever is
higher;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: Rental payments are credited toward
the royalties.
Idaho: All lands: Mining license tax[C];
Type of mines/minerals assessed: Quartz, gold, silver, copper, lead,
zinc, coal, phosphate, limestone, and other metals and minerals
extracted from all mines;
Type of royalty: Net proceeds royalty; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 1%; Base: Net value of
ore; taxpayer may select either of two methods of computation[D];
Royalty deductions and limitations: Deductions: (1) Internal Revenue
Service method - deductions include costs of mining and processing, and
depletion[E]; (2) Interior Method--deductions include costs of mining
and transportation, and depletion; Limitations: None identified in
statute or regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Idaho Code § 47-701 et seq; correspondence, State of Idaho Minerals
Program, Mar. 25, 2008; at present, there is no production from
hardrock mineral leases in Idaho.
[B] Idaho Code § 47-701 et seq. Idaho Admin. Code r. 20.03.05.001 et
seq.; State of Idaho Minerals Program, Mar. 25, 2008.
[C] Idaho Code §§ 47-1201, 47-1202, 47-1205; State of Idaho Minerals
Program, Mar. 25, 2008.
[D] Depletion is an accounting method used to reflect the actual
physical reduction of natural resources in asset value; two-thirds of
the tax is placed into an abandoned mine reclamation fund.
[E] Referencing an Internal Revenue Service method and an Interior
method.
[End of table]
Table 8: Montana:
Montana: State lands: Royalty--Metalliferous Mines[A];
Type of mines/minerals assessed: Metalliferous minerals (including
gold, silver, lead, zinc, copper, platinum, iron, and all other
metallic minerals) or gems (sapphires, rubies, and other stones
commonly known as "precious stones" or "semiprecious stones");
Type of royalty: Gross revenue or net smelter returns; Rate
determination: Statute requires royalty, and delegates to Board of Land
Commissioners subject to standard of "a royalty which shall, together
with other considerations to be paid by the mining lessee, constitute
the full market value of the leasehold interest," and a minimum
percentage;
Royalty rate: Rate type: Case by case, within direction of statute;
Current rate: 5% to 8% of returns, but no less than 5% of the fair
market value; Base: Fair market value is defined as the value of the
minerals or gems in raw crude form as recovered at the mine site;
Returns are defined as the net amount received by the shipper after
deducting reasonable transportation costs to the closest feasible point
of sale, smelting charges and deductions, and other treatment costs;
Royalty deductions and limitations: Deduction: (Note: For returns, any
cost of producing or treating at the mine is not included as a
deduction); Limitation: None identified in statute or regulation.
Montana: State lands: Royalty--non metallic minerals[B];
Type of mines/minerals assessed: Nonmetallic minerals (not including
coal, oil, or gas);
Type of royalty: Lease-specific; Rate determination: Statute requires
royalty, and delegates to Board of Land Commissioners subject to
certain bases and the standard that the rates shall be as would be
charged by private owners under similar circumstances, or as in the
determination of the board is fair and reasonable;
Royalty rate: Rate type: Case by case, within direction of statute;
Current rate: Not available; Base: Gross value by either weight or
cubic measurement;
Royalty deductions and limitations: Deductions: Not applicable;
Limitations: Not applicable.
Montana: All lands: Mining license tax--metal mine[C];
Type of mines/minerals assessed: Gold, silver, copper, lead, or any
other metal or metals or precious or semiprecious gems or stones of any
kind extracted from all mines on state lands;
Type of royalty: Net smelter returns royalty; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform within each category; Current rate:
Precious and base metal processed concentrates shipped to a refinery--
1.6%; mineral concentrates shipped to smelter, mill, or reduction
works--1.81%; Base: Gross value of product, less first $250,000; Gross
value is the receipts received from the sale of concentrates or metals
extracted from mines or recovered from the smelting, milling,
reduction, or treatment of such ores. Receipts received is defined as
the payment received, less allowable deductions;
Royalty deductions and limitations: Deductions: Treatment and refinery
charges; costs of transportation from the mine or mill to the smelter,
roaster, or other processing facility, quantity, price, impurity and
penalty charges; and interest; Limitations: None identified in statute
or regulation.
Montana: All lands: Mining license tax--micaceous mines[D];
Type of mines/minerals assessed: Vermiculite, perlite, kerrite,
maconite, or any other micaceous minerals extracted from all mines on
state lands;
Type of royalty: Unit-based; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: $0.05 per ton; Base:
Not applicable;
Royalty deductions and limitations: Deductions: Not applicable;
Limitations: None identified in statute or regulation.
Montana: All lands: Resource indemnity and groundwater assessment
tax[E];
Type of mines/minerals assessed: Any precious stones or gems, gold,
silver, copper, coal, lead, petroleum, natural gas, oil, uranium, talc,
vermiculite, limestone, or other nonrenewable, merchantable products
extracted from all mines on state lands;
Type of royalty: Metals--net smelter returns royalty; Selected
minerals--revenue royalty with reference price; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform within each category; Current rate:
Default rate: 0.5% of gross value > $5,000; garnets: 1% of gross value
> $2,500; Limestone: 10% of gross value > $250; vermiculite: 2% of
gross value > $1,250; talc: 4% of gross value > $625; Base: Gross
value, defined as the market value of any merchantable mineral
extracted. For several minerals, the gross value is fixed by the
statute, with reference to a price index. For metals and gems, the
gross value is the receipts received (see above under License Tax);
Royalty deductions and limitations: Deductions: Generally, none; metals
and gems--as outlined above under License Tax; Limitations: None
identified in statute or regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Mont. Code Ann. § 77-3-101 et seq; Mont. Admin. R. 36.25.601-617.
[B] Mont. Code Ann. § 77-3-201-211.
[C] Mont. Code Ann. §§ 15-37-101 et seq.; Mont. Code Ann. §§ 15-23-801.
[D] Mont. Code Ann. § 15-37-201.
[E] Mont. Code Ann. § 15-38-101-136; persons who have paid the license
tax for metal mines are exempt from this tax.
[End of table]
Table 9: Nevada:
Nevada: State lands: Royalty[A];
Type of mines/minerals assessed: Minerals extracted from state lands;
Type of royalty: Lease-specific; Rate determination: Statute delegates
broad authority for lease of public lands to Administrator of the
Division of State Lands, for such terms and consideration as the
Administrator of the Division of State Lands may determine reasonable
based upon the fair market value;
Royalty rate: Rate type: Case by case; Current rate: Not available;
Base: Not available;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Nevada: All lands: Extraction/severance tax[B];
Type of mines/minerals assessed: Ores, coal, oil, gas, or other mineral
substances, but not sand and gravel extracted from all lands;
Type of royalty: Net proceeds royalty; Rate determination: Statutory;
Royalty rate: Rate type: Progressive (tax rate increases as mining
efficiency increases, and maximum rate imposed at threshold proceeds
level); Current rate: 2% to 5%; rate is progressive based on the ratio
of net proceeds to gross proceeds (seven steps between <10% and >50%).
Also: If net proceeds over $4M then at 5%; if below $4M, and the county
tax ad valorem is more than 2%, then that rate shall be the minimum
tax. Base: Net proceeds defined as gross value less deductions. Gross
value of mineral product is defined as the proceeds of the sale of the
product (applies to all minerals including any reduction,
beneficiation, or any treatment used by the producer to obtain a
commercially marketable mineral product);
Royalty deductions and limitations: Deductions: Deductions include
extraction costs, processing, refining and sale costs, transportation
from the mine to place of processing and sale, marketing costs,
operating costs, royalties, reclamation costs, and certain
administrative overhead costs; taxes and liability insurance costs are
not deductible; Limitations: None identified in statute or regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Nev. Rev. Stat. §§ 322.010-322.075; in practice, there are no
current state lands mineral leases because Nevada owns very little
available land.
[B] Nev. Rev. Stat. Ch. 362; Nev. Admin. Code Ch. 362.
[End of table]
Table 10: New Mexico:
New Mexico: State lands: Royalty (general)[A];
Type of mines/minerals assessed: Minerals other than common salt, oil
and gas, coal, shale, clay, gravel, building stone and building
materials, potassium, sodium, phosphorus and other minerals of similar
occurrence, and their salts and compounds; and excepting rare earths,
etc., extracted from public lands over which the Commissioner of Public
Lands has jurisdiction[J];
Type of royalty: Net smelter returns royalty; Rate determination:
Delegated to Commissioner of Public Lands with statutory minimum;
Royalty rate: Rate type: Case by case, subject to statutory minimum;
Current rate: As determined by the Commissioner, but not less than 2%;
Base: Gross returns shall be based on the arm's length sales price of
the produced minerals (from the smelter, mill, reduction process, or
other sale) (including all premiums, bonuses, and other consideration
of any kind received by the lessee for the minerals produced);
Royalty deductions and limitations: Deductions: Reasonable
transportation and smelting or reduction charges, up to 50% of gross
returns; Limitations: None identified in statute or regulation.
New Mexico: State lands: Royalty on selected minerals, such as uranium,
and gems[B];
Type of mines/minerals assessed: Rare earths, precious stones or
semiprecious stones, uranium, thorium, plutonium, and any other mineral
designed by the Atomic Energy Commission to be peculiarly essential to
the production of fissionable materials extracted from all public lands
over which the Commissioner of Public Lands has jurisdiction[J];
Type of royalty: Net smelter returns royalty; Rate determination:
Delegated to Commissioner of Public Lands with statutory minimum of 5%;
Royalty rate: Rate type: Case by case subject to statutory minimum;
Current rate: Not available; no less than 5%; Base: Gross returns shall
be based on the arm's-length sales price of the produced minerals (from
the smelter, mill, reduction process, or other sale) and shall include,
if applicable, all premiums, bonuses, and other consideration of any
kind received by the lessee for the minerals produced;
Royalty deductions and limitations: Deductions: Reasonable
transportation and smelting or reduction charges, up to 50% of gross
returns; Limitations: None identified in statute or regulation.
New Mexico: State lands: Royalty on selected minerals and salts[C];
Type of mines/minerals assessed: Potassium, sodium, phosphorus, and
other minerals of similar occurrence and their salts and compounds,
including chlorides, sulphates, carbonates, borates, silicates,
nitrates, and any and all other salts and compounds; except sodium
chloride extracted from all public lands over which the Commissioner of
Public Lands has jurisdiction[J];
Type of royalty: Gross revenue royalty; Rate determination: Statute
delegates to Commissioner to grant leases; leases must contain a
royalty, to be established by regulation[K];
Royalty rate: Rate type: Case by case, within direction of statute, and
for selected minerals, subject to a minimum; Current rate: Not
available; Base: Gross value of the product after processing;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
New Mexico: All lands: Severance tax--general provisions[D];
Type of mines/minerals assessed: All metalliferous and nonmetalliferous
minerals extracted from all lands;
Type of royalty: Where posted market price available--Net smelter
returns royalty; Default--Gross revenue royalty; Where mineral requires
processing before sale--Net smelter returns royalty; Rate
determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 0.125% (1/8); Base:
Taxable value is defined as the gross value less rental and royalty
payments to state or federal governments. Gross value is the sales
value of the severed and saved product at the first marketable point;
however, where posted field or market price is available, it shall be
used;
Royalty deductions and limitations: Deductions: Deductions for
calculation of gross value: (1) The default is no deductions (2) Where
posted field or market price is used, the costs of hoisting, crushing,
and loading necessary to place the severed product in marketable form
and place are deductible, up to 50% of the posted field or market price
(3) For products that must be processed or beneficiated before sale,
the freight charges from the point of severance to the point of first
sale and the cost of processing or beneficiation may be deducted;
Limitations: None identified in statute or regulation.
New Mexico: All lands: Severance tax--copper, lead, zinc, gold,
silver[E];
Type of mines/minerals assessed: Copper, lead, zinc, gold, and silver
extracted from all lands;
Type of royalty: Net proceeds royalty; Rate determination: Statutory;
Royalty rate: Rate type: Uniform within several categories; Current
rate: Copper 1/2%; gold and silver 1/5%; lead and zinc 1/8%; Base:
Taxable value = gross value less rental or royalty payments to state or
federal governments. Gross value: Copper, lead, and zinc = 66.67% of
sales value from published price data; Gold = sales value from
published price data; Silver = 80% of sales value from published price
data;
Royalty deductions and limitations: Deductions: Deductions for
calculation of gross value: Standard deduction of 50% of sales value
for hoisting, crushing, loading, processing, and beneficiation;
Limitations: None identified in statute or regulation.
New Mexico: All lands: Severance tax--Molybdenum[F];
Type of mines/minerals assessed: Molybdenum extracted from all lands;
Type of royalty: Net proceeds royalty/standard deduction; Rate
determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 0.125% (1/8); Base:
Taxable value is the gross value less rental or royalty payments to
State or U.S. Gross value is the value of molybdenum in concentrates
shipped from mine;
Royalty deductions and limitations: Deductions: Deductions for
calculation of gross value: Standard deduction of 50% of the value;
Limitations: None identified in statute or regulation.
New Mexico: All lands: Severance tax--potash[G];
Type of mines/minerals assessed: Potash or potash products extracted
from all lands;
Type of royalty: Net proceeds; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 2.5%; Base: Taxable
value is the gross value less rental or royalty payments to state or
federal governments; gross value: (1) for potash requiring processing
or beneficiation, 33-1/3% of sale proceeds or value (2) otherwise, 40%
of the posted field or market price;
Royalty deductions and limitations: Deductions: Actual cost of
hoisting, crushing, and loading, up to 50% of market price;
Limitations: None identified in statute or regulation.
New Mexico: All lands: Severance tax--uranium[H];
Type of mines/minerals assessed: Uranium extracted from all lands;
Type of royalty: Net proceeds royalty[L]; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform; Current rate: 3.50% on taxable value
(effectively 1.75% on revenue); Base: Taxable value is 50% of sales
price of the content of uranium oxide;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
New Mexico: All lands: Resources excise tax (severers and
processors)[I];
Type of mines/minerals assessed: Metalliferous and nonmetalliferous
extracted from all lands;
Type of royalty: Modified gross revenue royalty; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform within several categories; Current
rate: Default 0.75%; Potash 0.5% (severers) or 0.125% (processors);
Molybdenum 0.125%; Base: Taxable value, which is the value after
severing or processing;
Royalty deductions and limitations: Deductions: Royalties paid to state
or federal governments; proceeds from sales to the State, U.S., tribes,
or nonprofit organizations; Limitations: The Resources Excise Tax
imposes a resources tax on severers and a processors tax on processors;
however, only one of the two taxes is imposed on a given mineral
product. If the mineral is mined and processed in state, only the
processors tax is paid.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] N.M. Stat. Ann. § 19-8-14, -22; N.M. Admin. Code § 19.2.2; if a
lease is renewed to a fourth term (where minerals have not yet been
discovered), advance royalties are due on a per acre basis.
[B] N.M. Stat. Ann. § 19-8-14, -22; N.M. Admin. Code § 19.2.2.
[C] N.M. Stat. Ann. § 19-8-4, § 19-8-6; N.M. Admin. Code § 19.2.3.2,
19.2.3.12.
[D] N.M Stat. Ann. § 7-26-1 et seq.
[E] N.M Stat. Ann. § 7-26-4, -5.
[F] N.M. Stat. Ann. § 7-26-4, -5.
[G] N.M Stat. Ann. § 7-26-4.
[H] N.M. Stat. Ann. § 7-26-7, § 7-26-4(I).
[I] N.M. Stat. Ann. § 7-25-1-9; there also is a service tax, which
essentially imposes the severer's tax on a nonowner severer where the
product is not otherwise taxed by the resource excise tax.
[J] For example, granted to New Mexico from the United States in the
New Mexico enabling act.
[K] Regulation provides that royalties will be established by the
Commissioner on a negotiated basis. The regulation establishes minimum
royalties for potassium chloride and sulfates, but the Commissioner may
issue a lease at a reduced rate upon a showing of good cause.
[L] Although structured like a gross revenue royalty, the taxable value
discount of 50% makes the royalty function more like a net proceeds
royalty with standard deduction.
[End of table]
Table 11: Oregon:
Oregon: State lands: Royalty--metallics and uranium[A];
Type of mines/minerals assessed: Metallic minerals removed in
quantities greater than 10 yards per year extracted from on-shore state-
owned lands[C];
Type of royalty: Gross revenue royalty; Rate determination: Statute
delegates rules and conditions of leases to the Department of State
Lands; regulations specify rate;
Royalty rate: Rate type: Uniform; Current rate: 5%; Base: Gross value
of minerals at the mine mouth;
Royalty deductions and limitations: Deductions: None specified in
statute or regulation; Limitations: Rent ($1 per acre per year) is
credited against annual royalties.
Oregon: State lands: Royalty--Non-metallics[B];
Type of mines/minerals assessed: Nonmetallic minerals removed in
quantities greater than 10 yards per year extracted from on-shore state-
owned lands;
Type of royalty: Unit-based; Rate determination: Statute delegates
rules and conditions of leases to the Department of State Lands;
regulations do not specify terms for leases of nonmetallic minerals,
and delegate determination of royalty to Director subject to "fair and
reasonable" standard;
Royalty rate: Rate type: Case by case; Current rate: A rate per ton to
be determined by the Director to be fair and reasonable under the
particular lease; Base: Not applicable;
Royalty deductions and limitations: Deductions: Not applicable;
Limitations: Rent ($1 per acre per year) is credited against annual
royalties.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] OR Rev Statute § 273.775 thru 790; Or. Admin. R. § 141-071-0400 et
seq, -0610, -0620.
[B] OR Rev Statute § 273.775 thru 790; Or. Admin. R. § 141-071-0400 et
seq, -0610.
[C] State statute provides for royalties for use of stream bed
materials, but prohibits leases of submersible and submerged lands for
hardrock mineral mining.
[End of table]
Table 12: Utah:
Utah: State lands: Royalty[A];
Type of mines/minerals assessed: Classified minerals, including
metalliferous, potash, phosphate, gemstone/fossil, gypsum, gilsonite,
and others extracted from mines on lands and mineral estates owned or
held in trust by the state;
Type of royalty: Gross revenue royalty; Rate determination: Statute
requires a royalty on every mineral lease; directs Division of
Forestry, Fire and State Lands to issue rules specifying the basis upon
which the royalty shall be computed;
Royalty rate: Rate type: Uniform within each category; Current rate:
metalliferous metals, fissionable (e.g., uranium)--8%; Metalliferous
metals, non-fissionable--4%; potash, phosphate, gypsum --5%;
gemstone/fossil--10% (subject to annual minimum of $5 per acre);
gilsonite--10% (additional categories are listed in the regulation);
Base: Actual compensation received (plus value of any services, in-
kind, and other non-monetary compensation);
Royalty deductions and limitations: Deductions: None; Limitations: Rent
paid is credited against royalty.
Utah: All lands: Severance tax on metals and metalliferous minerals[B];
Type of mines/minerals assessed: Ore, metal, or other substance
containing gold, iron, mercury, nickel, uranium, or other of 57 listed
metals; does not include gem stones, potash, sand and gravel, oil, gas,
and coal, and others extracted from all lands;
Type of royalty: Net proceeds royalty/standard deduction; Rate
determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 2.6% of the taxable
value; Base: For minerals other than uranium, the taxable value is
defined as the gross proceeds from sale, less exemption of first
$50,000/year/mine, then reduced by standard percentage deduction. For
uranium, the gross proceeds is the amount received for the sale of
yellowcake;
Royalty deductions and limitations: Deductions: Metal, 70% deduction is
applied; ore (raw materials with metals content less than 15%) shipped
or sold out of state, 20% deduction is applied; Limitations: None
identified in statute or regulation.
Utah: All lands: Severance tax--beryllium[C];
Type of mines/minerals assessed: Beryllium;
Type of royalty: Other[D] (cost-based); Rate determination: Statutory;
Royalty rate: Rate type: Uniform within several categories; Current
rate: 2.6% of the taxable value; Base: Taxable value is 125% of the
direct mining costs;
Royalty deductions and limitations: Deductions: Not applicable;
Limitations: None identified in statute or regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Utah Code Ann. § 65A-6-1, 2; Utah Admin. R. R652-20-200, 1000,
4000; correspondence, State of Utah SITLA, Mar. 25-26, 2008; royalties
may be readjusted in leases with readjustment clause.
[B] Utah Code Ann. § 59-5-201, 203; Utah Admin. R. R865-16R.
[C] Utah Code Ann. § 59-5-201-203; Utah Admin. R. R865-16R.
[D] We categorized this royalty as other because it does not fit into
the four categories.
[End of table]
Table 13: Washington:
Washington: State lands: Royalty[A];
Type of mines/minerals assessed: Valuable minerals and specified
materials (except rock, gravel, sand, silt, coal, or hydrocarbons)
extracted from mines on lands and mineral estates owned or held in
trust by the state;
Type of royalty: Modified gross revenue royalty; Rate determination:
Statute requires production royalty on all leases (mining contracts);
delegates to Board of Natural Resources;
Royalty rate: Rate type: Uniform; Current rate: 5%; Base: "Gross
receipts" are receipts paid, earned, or received, at the point of sale
of the first marketable valuable mineral(s) produced, subject to
deduction;
Royalty deductions and limitations: Deductions: Limited to
transportation costs which are part of the development plan approved by
the department; Limitations: None identified in statute or regulation.
Washington: All lands: Business tax[B];
Type of mines/minerals assessed: All (coal, oil, natural gas, ore,
stone, sand, gravel, clay, mineral, or other natural resource product)
extracted from all lands;
Type of royalty: Gross revenue royalty; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 0.48%; Base: The value
of products and byproducts extracted for use or sale;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Wash. Rev. Code §§ 79.14.300 et seq, .410, .420; Wash Admin. Code §
333.16155; the royalty may be revised upon renewal of a mining
contract, by reference to then existing law.
[B] Wash. Rev. Code § 82.04.100, 230; extractors also may be subject to
a retail or wholesaler tax; however, the extracting tax is credited
against any retail/wholesale liability, effectively voiding it based on
current rates.
[End of table]
Table 14: Wyoming:
Wyoming: State lands: Royalty--general[A];
Type of mines/minerals assessed: Metallic and nonmetallic rocks and
minerals extracted from state lands;
Type of royalty: Default gross revenue royalty provided in regulation;
Rate determination: Statute delegates to Board of Land Commissioners to
establish in rules and regulations for mineral leases[H];
Royalty rate: Rate type: Progressive (default rates), case by case;
Current rate: Minimum $0.50/ton. Default rates are 5% to 10%, based on
the sales value per ton; Base: Sales value, which is total
consideration received for state production;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Wyoming: State lands: Royalty--trona[B];
Type of mines/minerals assessed: Trona/sodium extracted from state
lands;
Type of royalty: Gross revenue royalty provided in regulation; Rate
determination: Statute delegates to Board of Land Commissioners to
establish in rules and regulations for mineral leases. Regulations
provide the royalty "shall be based on the terms of the particular
lease agreement," but that specified default rates shall apply unless
specifically authorized by the board;
Royalty rate: Rate type: Uniform (default), case by case; Current rate:
6% (default); Base: Gross sales value of the soda ash and sodium
byproducts sold, which is total consideration received for state
production;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Wyoming: State lands: Royalty--uranium[C];
Type of mines/minerals assessed: Uranium extracted from state lands;
Type of royalty: Lease-specific, with default gross revenue royalty
provided in regulation; Rate determination: Statute delegates to Board
of Land Commissioners to establish in rules and regulations for mineral
leases. Regulations provide the royalty "shall be based on the terms of
the particular lease agreement," but that specified default rates shall
apply unless specifically authorized by the board;
Royalty rate: Rate type: Progressive (default rates), case-by-case;
Current rate: 2.5% to 3%, based on the average price of yellowcake
based on gross yearly sales realization (default); Base: Sales value,
which is total consideration received for state production;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Wyoming: State lands: Royalty--zeolite[D];
Type of mines/minerals assessed: Zeolite extracted from state lands;
Type of royalty: Lease-specific, with default unit-based provided in
regulation; Rate determination: Statute delegates to Board of Land
Commissioners to establish in rules and regulations for mineral leases.
Regulations provide the royalty "shall be based on the terms of the
particular lease agreement," but that specified default rates shall
apply unless specifically authorized by the board;
Royalty rate: Rate type: Progressive (default rates), case by case;
Current rate: $0.55 to $0.60+ per ton, depending on the average sale
price for bulk zeolite products (default); Base: Tons of mineral
production;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Wyoming: All lands: Mining severance tax--general[E];
Type of mines/minerals assessed: All "other valuable deposits" (other
than coal, oil and gas, trona, bentonite, uranium, and sand and gravel)
extracted from all lands;
Type of royalty: Gross revenue royalty[I]; Rate determination:
Statutory;
Royalty rate: Rate type: Uniform; Current rate: 2%; Base: Value of the
gross product, which is the fair market value of the minerals at the
mouth of the mine, after extraction;
Royalty deductions and limitations: Deductions: None identified in
statute or regulation; Limitations: None identified in statute or
regulation.
Wyoming: All lands: Mining severance tax--uranium[F];
Type of mines/minerals assessed: Uranium extracted from all lands;
Type of royalty: Modified net smelter returns royalty/standard
deduction; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; progressive under currently active
provision; Current rate: The statutory tax rate is 4%. However, the tax
is suspended for all uranium production occurring between January 1,
1995, and March 31, 2009, except for uranium production beginning with
the month that follows 6 consecutive months at which the spot market
price per pound of nonenriched uranium concentrate is at least $14.00
(according to specified indices). In such case, the tax is 1% to 4%
depending upon the spot market price. Base: Value of the gross product,
which is the fair market value of the minerals at the mouth of the
mine, after extraction, and not including any processing. Fair market
value is calculated by multiplying the individual producer's sales
value of yellow cake less all royalties, ad valorem production taxes,
and severance taxes; multiplied by the industry factor;
Royalty deductions and limitations: Deductions: The industry factor
provides a standard deduction and is an average of all uranium
producers' ratios of total mining costs to total mining and processing
costs incurred to produce yellow cake; Limitations: None identified in
statute or regulation.
Wyoming: All lands: Mining severance tax--trona[G];
Type of mines/minerals assessed: Trona extracted from all lands;
Type of royalty: Modified net smelter returns royalty/standard
deduction; Rate determination: Statutory;
Royalty rate: Rate type: Uniform; Current rate: 4%; Base: Fair market
value is that at the mouth of the mine, and not including any
processing;
Royalty deductions and limitations: Deductions: The value for tax
purposes is the fair market value of soda ash at the plant (f.o.b.)
multiplied by the industry factor (32.5%) divided by the individual
producer's trona-to-soda ash ratio less exempt royalties (the industry
factor divided by ration represent a percentage deduction);
Limitations: None identified in statute or regulation.
Source: GAO analysis of state statutes and regulations, March 2008.
[A] Wyo. Stat. § 36-6-101; Wyo. Admin. Code Land LC Ch. 24 § 2, § 7;
under certain circumstances, the board can reduce a royalty after the
mine is operating.
[B] Wyo. Stat. § 36-6-101; Wyo. Admin. Code Land LC Ch. 20 § 2, § 7(a).
[C] Wyo. Stat. § 36-6-101; Wyo. Admin. Code Land LC Ch. 21 § 2, § 7(a).
[D] Wyo. Stat. § 36-6-101; Wyo. Admin. Code Land LC Ch. 23 § 2, § 7(a).
[E] Wyo. Stat. Tit. 39, ch. 14, art. 7; Wyo. Stat. § 39-14-701 et seq.
[F] Wyo. Stat. § 39-14-503.
[G] Wyo. Stat. § 39-14-301 et seq.
[H] Regulations provide the royalty "shall be based on the terms of the
particular lease agreement," but that specified default rates shall
apply unless specifically authorized by the board, and subject to a
minimum.
[I] For minerals requiring processing before sale (i.e., at the mouth
of the mine), the royalty would function similar to a net smelter
returns in which the cost of processing is deducted.
[End of table]
[End of section]
Footnotes:
[1] GAO, Hardrock Mining: Information on State Royalties and Trends in
Mineral Import and Exports, [hyperlink,
http://www.gao.gov/products/GAO-08-849R] (Washington, D.C.: July 21,
2008); and GAO, Hardrock Mining: Information on Abandoned Mines and
Value and Coverage of Financial Assurances on BLM Land, [hyperlink,
http://www.gao.gov/products/GAO-08-574T] (Washington, D.C.: Mar. 12,
2008). We also testified on these issues in 2009; see GAO, Hardrock
Mining: Information on Types of State Royalties, Number of Abandoned
Mines, and Financial Assurances on BLM Land, [hyperlink,
http://www.gao.gov/products/GAO-09-429T] (Washington, D.C.: Feb. 26,
2009)
[2] Under U.S. mining laws, minerals are classified as locatable,
leasable, or saleable. Locatable minerals include those minerals that
are not leasable or saleable, for example, copper, lead, zinc,
magnesium, gold, silver, and uranium. Only locatable minerals continue
to be "claimed" under the Mining Act. For the purposes of this report,
we use the term "hardrock minerals" as a synonym for "locatable
minerals." Leasable minerals include, for example, oil, gas, and coal.
The Mineral Leasing Act of 1920, 41 Stat. 437 (codified at 30 U.S.C. §
181) created a leasing system for coal, gas, oil and other fuels, and
chemical minerals. Saleable minerals include, for example, common sand,
stone, and gravel. In 1955, the Multiple Use Mining Act of 1955, 69
Stat. 367 (codified at 30 U.S.C. § 601) removed common varieties of
sand, stone, and gravel from development under the Mining Act.
[3] The 12 western states are Alaska, Arizona, California, Colorado,
Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and
Wyoming.
[4] For purposes of this testimony, cleanup refers to the mitigation of
environmental impacts at mine sites, such as contaminated water, and
the reclamation of land disturbed by hardrock operations.
[5] South Dakota was included because it has a significant number of
abandoned hardrock mines and has been included in previous studies
estimating the number of abandoned hardrock mines.
[6] We defined an abandoned hardrock mine site as all associated
facilities, structures, improvements, and disturbances at a distinct
location associated with activities to support a past operation under
the general mining laws.
[7] [hyperlink, http://www.gao.gov/products/GAO-09-429T], [hyperlink,
http://www.gao.gov/products/GAO-08-849R], and [hyperlink,
http://www.gao.gov/products/GAO-08-574T].
[8] For a full discussion of the definition and formula for each type
of royalty, see [hyperlink, http://www.gao.gov/products/GAO-08-849R].
[9] Under Colorado tax laws, gross income is the value of ore
immediately after its removal from the mine and does not include any
value added subsequent to mining by any treatment processes.
[10] That is, the Montana royalty is assessed on the gross value of
product, less first $250,000. Gross value is the receipts received from
the sale of concentrates or metals extracted from mines or recovered
from the smelting, milling, reduction, or treatment of such ores.
Receipts received is defined as the payment received, less allowable
deductions.
[11] It has been difficult to determine the number of abandoned
hardrock mine sites from existing studies in part because there is no
standard definition for a hardrock mine site. For example, six studies
we reviewed relied on different definitions, and estimates varied
widely from study to study. For a full discussion of these six studies,
see [hyperlink, http://www.gao.gov/products/GAO-08-574T], appendix III.
[12] Tailings are a combination of fluid and rock materials that are
left behind after the minerals are extracted. Tailings are often
disposed of in a nearby pile.
[13] BLM and Forest Service, Abandoned Mine Lands: A Decade of Progress
Reclaiming Hardrock Mines (September 2007).
[End of section]
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