Not really as good as gold: Mining industry must pay fair share for what it takes from Alaska

Voices Of The State

Posted: Tuesday, March 18, 2008

The "Voices of the State" editorial on March 6 on the important role of mining in the future of Alaska does not tell you the complete story about what is driving the recent economic boost to state and local governments. Article VII - Natural Resource of the Alaska Constitution states, "It is the policy of the State to encourage the settlement of its land and the development of its resources by making them available for maximum use consistent with the public interest."

The mining industry is not giving back to Alaska for what it takes out and sells on the world market for extracting non-renewable resources from our lands.

Multinational resource extraction corporations are reaping profits from high mineral prices, with zinc being one of the most profitable commodities.

In 1955, when Alaska's mining royalty rates were set, a pound of zinc was selling for 12 cents a pound. In 2005 it was 63 cents, 2006 it was 85 cents and current prices are well over $1 per pound.

This explains why Teck Cominco was able to pay almost double its 2005 the royalty payments to NANA Corp., and why you see a jump in state mining license and income taxes.

Not all jobs are being filled by Alaskans. NANA shareholders have never held more than 60 percent (2000) of the jobs at the Red Dog Mine. In 2006, Red Dog Mine employees were only 56 percent shareholders. Gold currently is selling for over $900 an ounce; isn't it past time we take a look at the 53-year-old tax rates on Alaska mines to ensure the mining industry pays its fair share?

As Gov. Wally Hickel and the late Gov. Jay Hammond long argued, the tax structure on Alaska mines isn't, as our constitution requires, providing for the "maximum benefit" from the development of our resources. Under Alaska's current mining laws, mining companies are required to pay rents and royalties.

The royalty rate is 3 percent of their profit. This "net income royalty" allows for the deduction of costs associated with mining.

Most states realize a fare return from mining by requiring a "net smelter royalty," which is a royalty on the value of the mineral after it has been refined or smeltered, but without deducting the cost of development, production and environmental liability.

A net smelter royalty provides greater revenue predictability. Alaska and Nevada are the only states that have a profits based "net income royalty." Mines are subject to income taxes, royalties and the mining license tax. Excluding coal royalties, all are deductible when they calculate net income.

The current mining license tax is 3 to 5 percent. Raising the license tax to 5 to 7 percent would better compensate Alaskans for the valuable, nonrenewable resources extracted from our lands, especially since the total gross mineral production rate in Alaska was at $3.4 billion in 2007.

Since 1955, the mining industry has been extracting Alaska's mineral resources and making significant profits, especially in recent years with coal, minerals and metals at all-time highs, without paying a fair price to Alaskans for those resources.

The petroleum industry tax structure has been revised significantly since statehood. Responsible mining respects and protects communities and the environment and provides sustainable benefits to society.

It's time for the mining industry to pay fair market value for the minerals they extract and stop boasting about "temporary" jolts to Alaska's economy that will certainly disappear when mineral prices decrease or the ore is depleted.

Vanessa Salinas is the campaign director for Alaskans for Responsible Mining.

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