Royalty of 12.5% proposed by new U.S. administration

The Clinton administration in the U.S. is proposing a 12.5% royalty on hardrock minerals mined on public lands.

President Bill Clinton’s economic plan to revive the American economy would also see a tax placed on the energy content (British Thermal Units) of all fuels.

The American Mining Congress (AMC), a trade association, suggests that such proposals will boost business costs and threaten to eliminate tens of thousands of jobs.

“The AMC is aware of the need to reduce the nation’s budget deficit and its members are willing to do their part to achieve this goal,” said AMC President John Knebel. “However, we question whether a 12.5% royalty will actually help accomplish this long-range goal.”

Knebel cited an economic impact study undertaken in 1992 on the effect of a 5% royalty on mining operations on public lands. Accounting firm Coopers & Lybrand and a law firm concluded that a 5% royalty could cost between 10,000 and 30,000 jobs in mining and related activities, primarily in the west. A proposal to set an 8% royalty was presented to Congress last year. Companies with operations on patented lands would be exempt from paying the royalty.

The AMC recommends implementing incentives to stimulate growth and create more jobs.

Metals companies, in particular ferroalloys and aluminum producers, may be hit hard by the Btu tax. According to the AMC, an energy tax will increase the cost of production, which in turn will weaken the competitiveness of domestic mines and mining equipment manufacturers.