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Industry Experts Lament Inclusion of Hardrock Mining Royalties and Fees in Reconciliation Spending Package

Against the backdrop of the accelerating battery arms race, and a recent growing realization that our nation has become over-reliant on critical mineral imports from adversary nations, the U.S. House of Representatives Natural Resources committee has added language to the proposed $3.5 trillion reconciliation spending package last week that could throw a serious wrench into any promising developments recently taken to secure U.S. critical mineral supply chains, say industry experts.

Tucked into the massive spending package are provisions that would place an 8% gross royalty on already existing hardrock mines, while 4% would be placed on new ones. In addition, the proposed language would levy a 7 cent fee for every ton of rock moved in the mining process.

In a q&a session with Real Clear Energy on the proposal earlier this month, the National Mining Association’s Rich Nolan said:

“New royalties and fees (…) will crush the competitiveness of the industry when we know we need responsible, domestic production for everything from the energy transition to the EV revolution. The hardrock mining industry is already paying between 40% to 50% of earnings in federal, state and local royalties, taxes, and other fees. This punitive, partisan proposal (…) is just the opposite of what we need to reshore production and build secure supply chains.”

Citing the sharply increased need for metals and minerals in the context of the green energy transition, as outlined in recent studies by the World Bank and International Energy Agency, he added:

 “There’s no getting to where we want to go without embracing the need and opportunity for increased domestic mining. President Biden’s recent EV executive order warned that China is cornering the global market on battery and EV production and using control of material supply chains to do it.

Included in the Bipartisan Infrastructure bill are steps to improve mine permitting, to better leverage the Department of Energy’s loan guarantee program to encourage mineral production. That’s the right path. We have to be working to support the competitiveness of U.S. mining, not undercut it.”

It is estimated that the provisions, which would represent one of the most substantial changes to a 1872 law that has long governed U.S. hardrock mining, could raise about $2 billion in federal revenue over a decade.

With the reconciliation package still having to move through the congressional process, it is unclear whether the provision will even make it out of the House, or be changed or removed by the U.S. Senate.

However, against the backdrop of the ever-increasing mineral intensity of our green energy future, the potential impact of these provisions is significant, and we will keep tabs on this issue over the coming weeks.