Will mines get [Michigan] state’s riches for a paltry sum? – by Tina Lam (Detroit Free Press – November 28, 2011)

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Critics — and even a key state agency — say the state isn’t getting enough in exchange for the wealth of minerals about to be extracted from the Upper Peninsula.

The state has no severance tax on minerals, as it does on oil, gas and iron mines. The tax is a way to repay Michigan citizens for the value of underground resources removed forever from the state. The state also doesn’t auction mineral leases, as it does for oil and gas.

And finally, the state is getting only paltry sums from its future mines in fees and bonds for permits, potential cleanup costs and oversight.

Financial loopholes in mining are costing the state, some say

When Kennecott Eagle Minerals applied for a permit for its new mine near Big Bay, it paid what state law requires for its application fee: $5,000.

Five years later, the tab to the Department of Environmental Quality for reviewing and granting the mine permits is about $800,000.

“We’ll probably never get all of that back” unless the law changes, said Hal Fitch, director of the geological survey office for the DEQ.

The costs include those for outside experts the department had to hire to review complex permits and a lengthy legal challenge by a coalition of environmental and tribal groups.

The permit fee isn’t the only one critics said is too low. The state also has no severance tax on new mines expected to open in the next few years, and environmental groups said that the bonds the companies must post in case they contaminate water or air near the mines and go bankrupt are too small.

Kennecott is owned by Rio Tinto, an international mining giant, and its Eagle mine is expected to pull more than $4 billion worth of minerals from the ground. Half the ore at the mine, which is under construction, is on state land.

Fitch said the DEQ would collect more fees later from a per-ton fee on the amount of earth moved from the mine under the state’s 2004 mining law. But that fee is capped at five cents per ton, and he said it wouldn’t cover the department’s costs for Eagle.

Relying on per-ton, earth-moving fees to make up for low permit fees also is flawed because the amount of earth moved in building each mine doesn’t necessarily match the amount of time the DEQ needs to spend examining the permit applications, he said.

“It’s really not fair, as written,” he said, adding that there have been discussions on changing that. The Legislature would have to vote to change the formula.

Agency depends on fees

The DEQ has had sharp cuts to its budget over the last decade and is heavily dependent on user fees to cover its costs.

Letter-writers to Upper Peninsula newspapers have complained over the last year that the state isn’t getting enough from the planned new mines.

Critics said another flaw is the financial bond mines must post for environmental damage. Eagle’s owners put up a $17-million bond in case of bankruptcy and contamination left behind that the state must clean up. State cleanups at abandoned sites across Michigan — for everything from lead to chemicals — routinely last for years and cost millions of dollars.

For the rest of this article, please go to the Detroit Free Press website: http://www.freep.com/article/20111128/NEWS05/111280328/Will-mines-get-state-s-riches-paltry-sum-?odyssey=tab|topnews|text|FRONTPAGE