[Congressional Record Volume 153, Number 168 (Thursday, November 1, 2007)]
[Senate]
[Pages S13687-S13689]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD (for himself, Ms. Cantwell, and Mrs. Feinstein):
  S. 2287. 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.
  Mr. FEINGOLD. Mr. President, today I am very pleased to be joined by 
Senators Cantwell and Feinstein in introducing legislation to eliminate 
from the Federal tax code the ``Percentage Depletion Allowance'' for 
hardrock minerals mined on Federal public lands. Elimination of this 
double subsidy will produce estimated savings of at least $500 million 
over 5 years, based on the most recent year for which figures are 
available from the Joint Committee on Taxation and the Clinton 
administration's fiscal year 2001 budget proposal. These savings will 
help fund the reclamation and restoration of abandoned mines through an 
Abandoned Mine Reclamation Fund, that my bill creates, and the 
remaining \3/4\ of savings will be returned to the Federal treasury.
  Percentage depletion allowances were initiated by the Corporation 
Excise Act of 1909. That is right, these allowances were initiated 
nearly 100 years ago. 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

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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. The 
problem, however, is that 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 its 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. Under the cost depletion method, the total deductions 
cannot exceed the original capital investment.
  Under percentage depletion, however, 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 the capital that the company invested. The 
set rates for percentage depletion are quite significant. Section 613 
of the Internal Revenue Code contains depletion allowances for more 
than 70 metals and minerals, at rates ranging from 10 to 22 percent.
  There is no restriction in the tax code to ensure that over time 
companies do not deduct more than the capital that a company has 
invested. Furthermore, a Percentage Deduction Allowance makes sense 
only so long as the deducting company actually pays for the investment 
for which it claims the deduction.
  The result is a double subsidy for hardrock mining companies: first 
they can mine on public lands for free under the General Mining Law of 
1872, and then they are allowed to take a deduction for capital 
investment that they have not made for the privilege to mine on public 
lands. My legislation would eliminate the use of the Percentage 
Depletion Allowance for mining on public lands, resulting in an 
estimated savings of $450 million over 5 years, while continuing to 
allow companies to recover reasonable cost depletion.
  My bill would also create a new fund, called the Abandoned Mine 
Reclamation Fund. One-fourth of the revenue raised by the bill, or 
approximately $110 million, would 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. Though there is no 
comprehensive inventory of abandoned mines, estimates put the figure at 
upwards of 100,000 abandoned mines on public lands.
  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.
  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: the 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, and one of those choices is whether to 
continue the special tax breaks provided to the mining industry.
  The measure I am introducing is 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 depreciation rates given to other businesses. 
This corporate subsidy is simply not justified.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2287

       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 2007''.

     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, 
     2007.

     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 2007.
       ``(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

[[Page S13689]]

     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.''.
                                 ______