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Federal Policies and Red Tape Limit Mineral Production

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Unread 03.17.12, 11:03 AM
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Federal Policies and Red Tape Limit Mineral Production

On 03.17.12 05:04 AM posted by Alison Meyer

Not only have federal policies and inefficient permitting slowed oil and gas production, but government hurdles are also having a harmful effect on the mining industry.

Speaking earlier this week at Heritage’s Bloggers Briefing, Carol Raulston of the National Mining Association said the barriers to entry today are so burdensome that the United States imports $5.1 billion worth of minerals that we could be producing domestically.

“It is a very long process. Investors worldwide that provide the capital for these kinds of endeavors rank the United States as dead last in the world for the length of time it takes to get a permit,” said Raulston, who serves as NMA’s senior vice president of communications.

Minerals contribute more than $2 trillion to America’s economy and mineral mining supports more than 1.1 million U.S. jobs. But without reforms in Washington, the industry is facing challenges to future growth, Raulston said.

Mines contain a large up-front cost before owners can even make a profit, she noted. The permitting process alone averages seven to 10 years. Despite the time it takes to get a permit, other barriers to entry such as taxes and royalties make it costlier to do business.

“There are some policy issues that are now before Congress that would be even more harmful to U.S. mineral production,” Raulston said. “The Obama budget lists two items: One, he would impose at a minimum of 5 percent gross royalties on U.S. minerals production off federal lands. *A gross royalty means you don’t get to deduct any of your business expenses. They also have suggested what we like to call a ‘dirt tax.’ Mineral mines would pay on a per-time basis for all the dirt that they move to get at their reserve. Many of the mines in the U.S. are service mines, so they move a lot of dirt to get to that commodity whether or not it’s on private lands.”

These added costs would make mining non-competitive, according to Raulston.

“The price of all of these commodities is set on a world market, irrespective of where you mine it, so you have to compete with the rest of the world on how you sell your product,” she said.

Not only do the federal policies make it hard to conduct business, but they create a dependence on foreign minerals.

“This dependence on outside sources does have implications not only for our economy, U.S. manufacturers, consumer goods, etc., but also for our military and national defense,” she noted.

Regulations impacting the mining industry are an illustration of the increase of red tape that has been witnessed during the Obama administration. A new report from Heritage this week revealed 106 major new federal regulations were implemented during Obama’s first three years, adding more than $46 billion a year in new costs for Americans.

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