updated 11/8/2007 11:36:30 AM ET 2007-11-08T16:36:30

Not long after the Gold Rush, Congress passed a law meant to settle the West by letting prospectors stake claims and mine gold, silver and other minerals for free. It's survived essentially unchanged for 135 years.

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A bill passed by the House on Thursday would change that by forcing the hard-rock mining industry to pay royalties on minerals extracted from public lands. Coal mining and the oil and gas industries already pay such royalties.

The bill, which passed 244-166, also would put new environmental controls on hard-rock mining, set up a cleanup fund for abandoned mines and permanently ban cheap sales of public lands for mining.

Under current law, public lands can be sold for mining for as little as $2.50 an acre, although Congress has enacted annual prohibitions on that in recent years.

"This is a pirate story with the public lands profiteers robbing the American people blind," said Rep. Nick Rahall, D-W.Va. "The robbery of American gold and silver must stop."

Republicans objected that the royalties would amount to a tax on an already struggling industry and would send jobs overseas to countries that use child labor.

Republican opposition
The bill still needs approval from the Senate, where it faces stronger opposition. And the White House threatened a veto, saying that putting royalties on existing mining operations would invite lawsuits.

Republican opponents also circulated a letter contending the bill could threaten national security by limiting the domestic availability of minerals critical to the U.S. military like magnesium, which is used to make airplanes and missiles.

"This legislation hurts, perhaps even kills, the domestic mining industry and with it the towns and communities in western Nevada and rural America," said Rep. Dean Heller, R-Nev., whose state is the fourth-highest gold producer in the world, after South Africa, Australia and China.

"When mining communities are decimated there will be no royalties to collect," Heller said.

The bill would impose a royalty of 4 percent of gross revenue on existing hard-rock mining operations and 8 percent of gross revenue on new operations. The Congressional Budget Office estimates that about $1 billion a year would be subject to the proposed royalty.

The mining industry and its supporters say the bill's royalty scheme is way too high. They prefer the way it's done in Nevada, where the royalty is put not on gross revenue but on net income after taxes and other costs are subtracted.

Key Democrat also opposes
Senate Majority Leader Harry Reid, D-Nev., a gold miner's son and longtime supporter of the industry, said Wednesday that the House bill "won't stand over here."

Reid said he's working on legislation with the leaders of the Senate's energy committee and could support a royalty proposal like the way it's done in Nevada.

"If you define them like we do in the state of Nevada, we can work something out on royalties. But if you define them the way they are in the House bill, no," said Reid, who has sunk hard-rock mining reform attempts in the past.

In 1993, the House passed legislation imposing an 8 percent royalty, but agreement could never be reached with the Senate. The next year Republicans took control of the House and attempts to change the law were largely dropped. With Democrats back in charge this year, they and their environmentalist supporters see the best chance for change in years, though they still must contend with Reid.

Environmentalists say there are more than 500,000 abandoned hard-rock mines in the U.S. and cleaning them up would cost between $32 billion and $72 billion. The legislation would direct 70 percent of royalties collected under the bill to a cleanup fund, while the other 30 percent would go to a community impact fund.

Under an amendment by Heller agreed to Thursday, 50 percent of the money in the cleanup fund would be sent back to states where it's generated, while the other half would be distributed by the interior secretary.

Environmentalists hired a Ulysses S. Grant impersonator to patrol Capitol Hill this week to underscore the antiquity of the existing law, reminding that Grant was president when it became law.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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