**GAO-08-849R**                      Published: Jul 21, 2008. Publicly Released: Aug 20, 2008.                  

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## Highlights

Since the passage of the General Mining Act of 1872, miners have extracted billions of dollars worth of gold, silver, copper, and other hardrock (locatable) minerals from federal lands without having to pay a royalty. Congress is now considering amending the General Mining Act to, among other things, assess a royalty to ensure that the public is compensated 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, including Alaska (hereafter referred to as the 12 western states). 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. Although states may use similar names for functional royalties they assess, there can be wide variations in their forms and rates. To aid in the understanding of royalties, including functional royalties, the royalties are grouped as follows: (1) 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; (2) Gross revenue is typically assessed as a percentage of the value of the mineral extracted and does not allow for deductions of mining costs; (3) 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; and (4) 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. Hardrock minerals play an important role in the U.S. economy, contributing to multiple industries, including transportation, defense, aerospace, electronics, energy, agriculture, construction, and health care. The Department of the Interior's (Interior) U.S. Geological Survey (USGS) annually calculates U.S. "net import reliance as a percentage of U.S. apparent consumption" (hereafter referred to as "net import reliance") for nonfuel minerals using production data from annual USGS mineral industry surveys and import and export data from other sources. According to USGS, in recent years the United States has relied heavily on foreign sources for raw and processed minerals, including many hardrock minerals. In this context, Congress asked us to provide information on (1) which types of royalties the 12 western states assess on hardrock mining operations and (2) trends on imports and exports of hardrock minerals. In addition, you asked us to provide data on hardrock mining operations on federal lands that the federal government either does not routinely collect or consistently maintain.

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## Topics

Natural Resources and Environment

Extractive industryFederal regulationsstate relationsLand leasesMetalsMineral bearing landsMineral leasesMineral resourcesMineral resources conservationMineral rightsMiningPrecious metalsPublic landsRoyalty paymentsStatutory limitation