[Congressional Record Volume 145, Number 39 (Thursday, March 11, 1999)]
[Senate]
[Pages S2578-S2579]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD (for himself and Mr. Leahy):
  S. 590. A bill to amend the Internal Revenue Code of 1986 to repeal 
the percentage depletion allowance for certain hardrock mines, and for 
other purposes; to the Committee on Finance.


ELIMINATION OF DOUBLE SUBSIDIES FOR THE HARDROCK MINING INDUSTRY ACT OF 
                                  1999

  Mr. FEINGOLD. Mr. President, I am pleased to introduce legislation to 
eliminate from the federal tax code percentage depletion allowances for 
hardrock minerals mined on federal public lands. I am joined in 
introducing this legislation by my colleague from Vermont, Mr. Leahy.

  The President proposes the elimination of the percentage depletion 
allowance on public lands in his FY 2000 budget. The President's FY 
2000 budget estimates that, under this legislation, income to the 
federal treasury from the elimination of percentage depletion 
allowances for hardrock mining on public lands would total $478 million 
over five years, more than $95 million in this year alone. These 
savings are calculated as the excess amount of federal revenues above 
what would be collected if depletion allowances were limited to ``sunk 
costs'' in capital investments. Percentage depletion allowances are 
contained in the tax code for extracted fuel, minerals, metal and other 
mined commodities. These allowances have a combined value, according to 
1994 estimates by the Joint Committee on Taxation, of $4.8 billion.
  Mr. President, these percentage depletion allowances were initiated 
by the Corporation Excise Act of 1909. That's right, 1909. Provisions 
for a depletion allowance based on the value of the mine were made 
under a 1912 Treasury Department regulation, but difficulty in applying 
this accounting principle to mineral production led to the initial 
codification of the mineral depletion allowance in the Tariff Act of 
1913. The Revenue Act of 1926 established percentage depletion much in 
its present form for oil and gas. The percentage depletion allowance 
was then extended to metal mines, coal, and other hardrock minerals by 
the Revenue Act of 1932, and has been adjusted several times since.
  Percentage depletion allowances were historically placed in the tax 
code to reduce the effective tax rates in the mineral and extraction 
industries far below tax rates on other industries, providing 
incentives to increase investment, exploration and output. However, 
percentage depletion also makes it possible to recover many times the 
amount of the original investment.
  There are two methods of calculating a deduction to allow a firm to 
recover the costs of their capital investment: cost depletion, and 
percentage depletion. Cost depletion allows for the recovery of the 
actual capital investment--the costs of discovering, purchasing, and 
developing a mineral reserve--over the period during which the reserve 
produces income. Using

[[Page S2579]]

cost depletion, a company would deduct a portion of its original 
capital investment minus any previous deductions, in an amount that is 
equal to the fraction of the remaining recoverable reserves. Under this 
method, the total deductions cannot exceed the original capital 
investment.
  However, under percentage depletion, the deduction for recovery of a 
company's investment is a fixed percentage of ``gross income''--namely, 
sales revenue--from the sale of the mineral. Under this method, total 
deductions typically exceed, let me be clear on that point, Mr. 
President, exceed the capital that the company invested.
  The rates for percentage depletion are quite significant. Section 613 
of the U.S. Code contains depletion allowances for more than 70 metals 
and minerals, at rates ranging from 10 percent to 22 percent.
  In addition to repealing the percentage depletion allowances for 
minerals mined on public lands, Mr. President, my bill also creates a 
new fund, called the Abandoned Mine Reclamation Fund. One fourth of the 
revenue raised by the bill, or approximately $120 million dollars, will 
be deposited into an interest bearing fund in the Treasury to be used 
to clean up abandoned hardrock mines in states that are subject to the 
1872 Mining Law. Mineral Policy Center estimates that there are 557,650 
hardrock abandoned mine sites nationwide and the cost of cleaning them 
up will range from $32.7 billion to $71.5 billion.
  There are currently no comprehensive federal or state programs to 
address the need to clean up old mine sites. Reclaiming these sites 
requires the enactment of a program with explicit authority to clean up 
abandoned mine sites and the resources to do it. My legislation is a 
first step toward providing the needed authority and resources.
  Mr. President, in today's budget climate we are faced with the 
question of who should bear the costs of exploration, development, and 
production of natural resources: all taxpayers, or the users and 
producers of the resource? For more than a century, the mining industry 
has been paying next to nothing for the privilege of extracting 
minerals from public lands and then abandoning its mines. Now those 
mines are adding to the nation's environmental and financial burdens. 
We face serious budget choices this fiscal year, yet these subsidies 
remain a persistent tax expenditure that raise the deficit for all 
citizens or shift a greater tax burden to other taxpayers to compensate 
for the special tax breaks provided to the mining industry.
  Mr. President, the measure I am introducing is fairly 
straightforward. It eliminates the percentage depletion allowance for 
hardrock minerals mined on public lands while continuing to allow 
companies to recover reasonable cost depletion.
  Though at one time there may have been an appropriate role for a 
government-driven incentive for enhanced mineral production, there is 
now sufficient reason to adopt a more reasonable depletion allowance 
that is consistent with those given to other businesses.
  Mr. President, the time has come for the Federal Government to get 
out of the business of subsidizing business. We can no longer afford 
its costs in dollars or its cost to the health of our citizens. This 
legislation is one step toward the goal of ending these corporate 
welfare subsidies.
  I ask unanimous consent that a copy of the legislation be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 590

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Elimination of Double 
     Subsidies for the Hardrock Mining Industry Act of 1999''.

     SEC. 2. REPEAL OF PERCENTAGE DEPLETION ALLOWANCE FOR CERTAIN 
                   HARDROCK MINES.

       (a) In General.--Section 613(a) of the Internal Revenue 
     Code of 1986 (relating to percentage depletion) is amended by 
     inserting ``(other than hardrock mines located on lands 
     subject to the general mining laws or on land patented under 
     the general mining laws)'' after ``In the case of the 
     mines''.
       (b) General Mining Laws Defined.--Section 613 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following:
       ``(f) General Mining Laws.--For purposes of subsection (a), 
     the term `general mining laws' means those Acts which 
     generally comprise chapters 2, 12A, and 16, and sections 161 
     and 162 of title 30 of the United States Code.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 3. ABANDONED MINE RECLAMATION FUND.

       (a) In General.--Subchapter A of chapter 98 of the Internal 
     Revenue Code of 1986 (relating to establishment of trust 
     funds) is amended by adding at the end the following:

     ``SEC. 9511. ABANDONED MINE RECLAMATION FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Abandoned Mine Reclamation Trust Fund' (in this section 
     referred to as `Trust Fund'), consisting of such amounts as 
     may be appropriated or credited to the Trust Fund as provided 
     in this section or section 9602(b).
       ``(b) Transfers to Trust Fund.--There are hereby 
     appropriated to the Trust Fund amounts equivalent to 25 
     percent of the additional revenues received in the Treasury 
     by reason of the amendments made by section 2 of the 
     Elimination of Double Subsidies for the Hardrock Mining 
     Industry Act of 1999.
       ``(c) Expenditures From Trust Fund.--
       ``(1) In general.--Amounts in the Trust Fund shall be 
     available, as provided in appropriation Acts, to the 
     Secretary of the Interior for--
       ``(A) the reclamation and restoration of lands and water 
     resources described in paragraph (2) adversely affected by 
     mineral (other than coal and fluid minerals) and mineral 
     material mining, including--
       ``(i) reclamation and restoration of abandoned surface mine 
     areas and abandoned milling and processing areas,
       ``(ii) sealing, filling, and grading abandoned deep mine 
     entries,
       ``(iii) planting on lands adversely affected by mining to 
     prevent erosion and sedimentation,
       ``(iv) prevention, abatement, treatment, and control of 
     water pollution created by abandoned mine drainage, and
       ``(v) control of surface subsidence due to abandoned deep 
     mines, and
       ``(B) the expenses necessary to accomplish the purposes of 
     this section.
       ``(2) Lands and water resources.--
       ``(A) In general.--The lands and water resources described 
     in this paragraph are lands within States that have land and 
     water resources subject to the general mining laws or lands 
     patented under the general mining laws--
       ``(i) which were mined or processed for minerals and 
     mineral materials or which were affected by such mining or 
     processing, and abandoned or left in an inadequate 
     reclamation status before the date of the enactment of this 
     section,
       ``(ii) for which the Secretary of the Interior makes a 
     determination that there is no continuing reclamation 
     responsibility under State or Federal law, and
       ``(iii) for which it can be established to the satisfaction 
     of the Secretary of the Interior that such lands or resources 
     do not contain minerals which could economically be extracted 
     through remining of such lands or resources.
       ``(B) Certain sites and areas excluded.--The lands and 
     water resources described in this paragraph shall not include 
     sites and areas which are designated for remedial action 
     under the Uranium Mill Tailings Radiation Control Act of 1978 
     (42 U.S.C. 7901 et seq.) or which are listed for remedial 
     action under the Comprehensive Environmental Response 
     Compensation and Liability Act of 1980 (42 U.S.C. 9601 et 
     seq.).
       ``(3) General mining laws.--For purposes of paragraph (2), 
     the term `general mining laws' means those Acts which 
     generally comprise chapters 2, 12A, and 16, and sections 161 
     and 162 of title 30 of the United States Code.''
       (b) Conforming Amendment.--The table of sections for 
     subchapter A of chapter 98 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following:

``Sec. 9511. Abandoned Mine Reclamation Trust Fund.''
                                 ______