Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2009

Mr. President, I rise today to introduce legislation that will establish a Forest Carbon Incentives Program to help America's family forest owners slow climate change by increasing carbon sequestration and storage on private forestland. This will be critical for our national climate change response, and will create important economic opportunities for landowners across America. I want to thank my colleagues, Senators Snowe, Collins, Sanders, Merkley, Wyden, Leahy and Schumer, with whom I have worked closely to draft this bill. I also want to acknowledge Senator Stabenow, who has long provided leadership on this issue of carbon sequestration.

This legislation is driven by a simple fact: we cannot achieve our greenhouse gas reduction goals without comprehensive and effective utilization of U.S. forests for carbon sequestration. The U.S. Environmental Protection Agency estimates that U.S. forests currently sequester a remarkable 10 percent of our annual U.S. carbon emissions. Even more remarkably, the EPA estimates that we could double this sequestration capacity to 20 percent of emissions with the right management and conservation.

Unlike some of our emerging energy technologies, forest carbon sequestration is a climate strategy that is ready to go to work right now on meeting our emissions reduction goals. We can immediately put forest owners to work on their lands undertaking activities to help move us to that 20 percent sequestration goal, and create new revenue streams for those small and family landowners to help them navigate through these troubled economic times.

One important pathway to achieve these forest carbon sequestration goals will be through carbon offset markets. For those able to participate, carbon offset programs will provide important financial incentives for projects that reduce greenhouse gas emissions while, at the same time, helping to keep the costs of a climate program low. The opportunity to earn offset credits will create a financial incentive for large forest landowners to undertake activities that increase carbon sequestration and storage on their lands and that can be measured and verified with the precision necessary to meet rigorous environmental integrity requirements.

However, offset markets will not be easily accessible to the many family forest owners and other smaller landowners who do not have the necessary economies of scale to effectively participate in offset markets. Offset projects come with many upfront and ongoing transactional expenses that will undermine financial gains and constrain the flexibility that family forest owners and other smaller scale landowners will require to participate.

Furthermore, there are some important types of carbon sequestration and storage activities, such as permanent conservation easements, that produce real carbon gains over the long term but are hard to quantify with the precision necessary for offset markets.

We also need to engage the full range of carbon strategies to meet our carbon sequestration goals, even if they cannot conform to the requirements of offsets.

Engaging family forest owners in sequestration is no small piece of the forest carbon equation--America's family forest owners control more than half of all U.S. private forestland, with 119 million acres in ownerships of 100 acres or less. We must create new tools to engage these individuals in efforts to sequester carbon and provide economic opportunities to gain financial incentives for doing that work.

In my home State of New Hampshire, our forests embody this diverse ownership pattern and the unique opportunity to address climate change through forest carbon incentives. New Hampshire is the second most forested state in the nation, and more than 80 percent of that forestland is in private hands. We do have some large private ownerships, including large blocks of working forestland. But most of our privately owned forestland is in small ownerships--averaging 37.5 acres. According to the U.S. Forest Service, 49 percent of New Hampshire's forestland, 2,358,000 acres, is in family ownership, with 124,000 family forest owners in the Granite State.

If these landowners could aggregate their capacity to store carbon on the 2 million acres they own, they could make a significant contribution to needed reductions in the presence of carbon dioxide in our atmosphere. Each year New Hampshire forests already take up by photosynthesis 25 percent of the total CO2 emitted by the State from man-made sources.

But we can capture even more carbon in our Nation's forests with the right incentives like those in our proposed program. Creating incentives for forest carbon would represent a win-win for New Hampshire and a win-win in every State in the Nation that has privately owned forested landscapes.

Simply, the Forest Carbon Incentives Program will provide financial incentives for small private forest owners to engage in carbon sequestration activities and help our country meet its desired carbon reduction goals. The Forest Carbon Incentives Program will be run through the U.S. Forest Service and State forestry agencies. These experienced forest professionals will work with interested private forest owners to develop a ``climate mitigation contract'' for undertaking forest management activities that will increase carbon absorption and storage. Incentives will be awarded on a straightforward ``practices per acre'' basis, giving landowners a clear and simple agreement and reliable incentive payments. Carbon reductions achieved through these practices are not required to be permanently stored, so landowners will retain more flexibility with future management decisions. This simple and efficient program structure will enable landowners at any scale to participate, especially family forest owners holding smaller parcels that are unlikely to participate in carbon offset markets.

The program will create additional incentive opportunities for interested landowners to protect carbon gains achieved through a climate mitigation contract. Landowners can gain ``bonus'' incentive payments for also undertaking management that addresses pests, fire, and other threats that could damage forests and release the carbon that has been stored there. Landowners can also be paid for a permanent conservation easement that will assure that their lands in the program will never be developed, thereby protecting the carbon in those forests.

This legislation already enjoys support from a broad spectrum of national organizations that care about America's forests, such as the American Forest Foundation, the National Association of State Foresters, The Trust for Public Land, the National Wildlife Federation, and The Nature Conservancy among many others. Of equal importance, it has earned broad support from local, state, and regional interest groups, including the Society for the Protection of New Hampshire Forests, New Hampshire Timberland Owners Association, Northland Forest Products, Appalachian Mountain Club, and a host of other leading forest organizations in my home state.

America must use every tool available to address climate change, and should especially favor strategies that are ready to go now and that create new economic opportunities. This legislation will provide both a meaningful climate mitigation strategy and create real jobs in the woods. I encourage my fellow Senators to consider it carefully.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, today I am reintroducing legislation to eliminate from the Federal tax code the ``Percentage Depletion Allowance'' for hardrock minerals mined on Federal public lands. I want to thank Senators Cantwell, Feinstein, and Sanders for joining me in introducing this legislation.

The Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2009 would result in estimated savings of at least $250 million over 5 years, according to the Joint Committee on Taxation. Under this legislation, half of these savings would be returned to the Federal treasury and half would help address the serious contamination at the thousands of abandoned mines throughout the U.S.

Percentage depletion allowances were initiated by the Corporation Excise Act of 1909. That's right, these allowances were initiated 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 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 they have 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, while continuing to allow companies to use the reasonable cost depletion method for determining tax deductions.

My bill would also create a new fund, called the Abandoned Mine Reclamation Fund. Half of the revenue raised by the bill, or approximately $125 million dollars, 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 use the reasonable cost depletion method for determining tax deductions.

Though at one time there may have been an appropriate role for a government-driven incentive for enhanced mineral production, the arguments in favor of a more reasonable depletion allowance that is consistent with depreciation rates given to other businesses are overwhelming. This corporate subsidy is simply not justified.

I thank the following organizations for endorsing this legislation: EARTHWORKS, Environmental Working Group, Friends of the Earth, National Wildlife Federation, Pew Environment Group, Taxpayers for Common Sense, Theodore Roosevelt Conservation Partnership, Trout Unlimited, and the Western Organization of Resource Councils.

Mr. President, today I am introducing the Naval Oil Shale Reserve Mineral Royalty Revenue Allocation Act. It is a bill designed to release mineral royalty receipts to Colorado where the receipts were generated from gas development within this reserve on the western slope near Rifle, Colorado.

By way of background, in 1997, Congress transferred the federal Naval Oil Shale Reserve lands in western Colorado from the U.S. Department of Energy, DOE, to the U.S. Bureau of Land Management, BLM, and directed the BLM to begin leasing the oil and gas resources under these lands. The Transfer Act also directed that the royalties recouped from this leasing program be set aside and the state portion not disbursed to Colorado until the Interior Department and the DOE certified that enough money from the royalty receipts accrued to satisfy two purposes.

The first was to provide funding to clean up the Anvil Points site on these lands. Anvil Points was an oil shale research facility that operated within the Naval Oil Shale Reserve for about 40 years. The facility was operated by DOE at one point, and private industry performed research there under contract. Waste material was produced at this facility from oil shale mining and processing. That waste accumulated in a pile of about 300,000 cubic yards of spent oil shale and other material--including arsenic and other heavy metals--which rests on slopes below the facility.

The second purpose was for the reimbursement of certain costs related to the transfer.

Following the transfer to the BLM, this area experienced significant natural gas leasing and, as a result, significant royalty revenue was generated.

On August 8, 2008, the DOI and DOE certified that adequate funds had accrued to accomplish the goals of cleanup and cost reimbursement and subsequently allocated all royalty revenue generated after this date according to the Mineral Leasing Act, which establishes that Colorado receive a proportionate share.

However, considerably more revenue accrued than was necessary to accomplish the cleanup and cost reimbursement goals. This bill would direct that this additional royalty revenue be allocated to Colorado according to the formulas and processes established for the disbursement of federal mineral royalties under the Mineral Leasing Act.

The bill also directs that the Colorado share of this remaining royalty revenue be allocated to the two Counties directly impacted by oil and gas leasing on the Naval Oil Shale Reserve lands--specifically, Garfield and Rio Blanco Counties. The bill further requires that the royalties be used to address these impacts through activities such as land and water restoration, road repair, and other capital improvement projects.

Based on figures provided by the BLM, there remains approximately $17 million in these accounts for Colorado's royalty revenue share. This bill would make Colorado whole and provide it with its rightful share of the remaining royalty revenue to address critical local needs and impacts from the very leasing that produced the royalty revenue.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, today I am introducing legislation to provide more clean water for the City of Hermiston, for irrigators in the area and for the Umatilla River. It is good for farmers, fish and in-stream flows.

My legislation amends the Reclamation Wastewater and Groundwater Study and Facilities Act--P.L. 102-575--to authorize the City of Hermiston, OR, to participate in what is known as the Title XVI water reclamation program. This long-standing U.S. Bureau of Reclamation program encourages the reclamation and use of municipal, industrial and agricultural waste water. In this case, the City of Hermiston will treat municipal waste water and deliver it to a local irrigation district--the West Extension Irrigation District--for agricultural use. My bill is a companion bill to legislation already introduced for this same purpose in the House of Representatives by Representative Greg Walden, H.R. 2714. As with other Title XVI projects, this legislation would authorize the Bureau to assist the City in developing this project and provide a cost-share of 25 percent for the project.

The current Hermiston Water Plant discharges ``Class C'' water that can be used only for a limited amount of off-project pastureland irrigation or discharged into the Umatilla River. Beginning in December 2010, a new National Pollutant Discharge Elimination System limit will go into effect, changing the water temperature and pollutants requirements of treated water being put back into the river. Although the city is currently in compliance, once the new limits take effect, the city's current plant will not allow the city to meet the new requirements. As a result, the city will need to construct a new treatment plant, but it would still have difficulty meeting the water temperature requirements.

An upgrade of the plant would not only bring the city into compliance with the new discharge requirements, but it would increase the quality of the recycled water output from ``Class C'' water to ``Class A'' water, making it suitable for all irrigation needs, not just pastureland. Further, the proposed new plant would be configured to discharge its treated water to the West Extension Irrigation District, a Bureau of Reclamation-supported irrigation project. This will significantly increase the amount of water available to the District and will have a beneficial, long-term impact on a regional farming community that faces dwindling water supplies. Acreage available to utilize the city's recycled water discharge would increase from roughly 550 acres to nearly 11,000 acres.

Finally, by ending the discharge of warmer, lower quality water into the Umatilla River, the project will improve the habitat for wildlife and fish in the River, especially for endangered and threatened species. I am pleased that the Confederated Tribes of the Umatilla Indian Reservation, which has fishing rights in the Umatilla River, supports the city's efforts in this regard.

Mr. President, I rise today to introduce the Deafy Glade Land Exchange Act. This legislation would authorize a land exchange between the U.S. Forest Service and Solano County to help ensure the continued operation of the juvenile correctional facility and add nearly 80 acres of wilderness quality land to the Mendocino National Forest.

Nearly 10 years ago at the suggestion of the Forest Service, Solano County purchased more than 160 acres of wilderness quality land within the Mendocino National Forest--known as Deafy Glade--with the intention of exchanging the land for the Fouts Springs Ranch. This legislation would facilitate that exchange, so that the counties could own the land beneath the facility they operate, and in exchange, the Forest Service would acquire a wilderness quality inholding.

Solano County currently operates a youth correctional facility under a Special Use Permit issued by the Forest Service on the Fouts Springs Ranch, which covers approximately 82 acres within the boundaries of the Mendocino National Forest. Solano County owns the infrastructure but leases the land from the Forest Service.

Solano County has operated the Fouts Springs Youth Facility pursuant to a joint powers agreement with Yolo and Colusa counties since 1959. The program includes counseling and education, with the goal of giving juveniles the skills to successfully reenter their communities.

More than 20 California counties have placed juvenile offenders at Fouts Springs for 6 month, 9 month, or one year periods. The program is viewed as a last resort for youth before being referred to a State prison.

Specifically, the legislation I am offering today would authorize the transfer of Fouts Springs Ranch--approximately 82 acres--from the Forest Service to Solano County; and the transfer of more than 160 acres of the Deafy Glade area in Mendocino National Forest from Solano County to the Forest Service.

The Fouts Spring youth correctional facility is in need of substantial upgrades, including the replacement of the main water line, electrical system improvements, and renovation of one of the dormitories. However, the County has postponed investing in facility upgrades until the land exchange is finalized and ownership of the Fouts Springs Ranch is transferred to the County.

Given the substantial investment already made by Solano County and the importance of the youth rehabilitation services provided by Fouts Springs, I believe the time has come to finalize this land exchange.

This legislation would not only help ensure the continued operation of the Fouts Spring youth correctional facility but it would also add nearly 80 acres of wilderness quality land to the Mendocino National Forest.

I urge my colleagues to support this bill.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.