Prices for gold, zinc and silver are at high levels, and the House Ways and Means Committee in Juneau is now considering a bill that would ratchet up rates on the state mining license tax - a form of production tax - and would also change the basis on which state mineral royalties are calculated.

The outlook for the bill is uncertain and mining companies have lined up in a solid front against it, but lawmakers continue to tinker with the bill and veterans in the state Capitol say they wouldn't be surprised to see the issue eventually develop some momentum, particularly in the wake of the Legislature's likely approval of a major change in state oil taxes.

Hearings on House Bill 418, sponsored by Rep. Paul Seaton, R-Homer, continued in the Ways and Means Committee on March 27 and 29. The latest version of the bill would increase three brackets of the mining license tax by 2 percent, to new rates of 5 percent, 7 percent and 9 percent of net income.

A three-year exemption from the state tax in the current law would change to a three-year tax deferral with a 10-year payback schedule following the three years.

The basis on which the mineral royalty is paid would also change from 3 percent of profits to 3 percent of the net smelter return, which is the basis on which royalties are paid to some other landowners in Alaska, including private landowners like Alaska Native corporations. If smelting is not required, the 3 percent would be on the gross value at the point of production.

Seaton sponsored the bill because he thinks Alaska's mining industry bears a light tax burden compared to Alaska's other high-value resource industries. "State revenue generally amounts to only about seven-tenths of 1 percent of the mined resource value, while an additional 1 percent is paid to municipalities," he said in a sponsor statement.

Other resource industries contribute more, he said. "State revenue from oil and gas amounts to about 20 percent of total production value, while an additional 2 percent is paid to municipalities. State revenue from fisheries amount to about 2.8 percent of the total production value, while an additional 2.5 percent is paid to municipalities, excluding property tax, vessel and license fees," he said.

Steve Borel, executive director of the Alaska Miners Association, warned the Ways and Means Committee that now is not a good time to tinker with taxes on the minerals industry. "For most of the past 20 years, the mining industry has been suffering under low prices for precious metals, base metals and coal," Borel wrote in a letter to the committee.

"Many companies have been barely scratching by with these low prices," he said.

Many "junior" exploration companies hung in there through the low-price cycle, continuing to work in Alaska. "They believed in Alaska even when it was almost impossible to raise money," Borel said.

Today, minerals prices are all high and the state is experiencing a surge of exploration and new mine development. "To now change the rules just as exploration is increasing would be extremely poor policy. Such a change would show Alaska to be an unstable place to invest and would result in tremendous negative fallout for future investments," Borel said.

However, Scott Brennan, director of Alaskans for Responsible Mining, a nonprofit industry watchdog group, support the changes in HB 418, particularly the change in the mining royalty away from net profits to net smelter return.

"The royalty rate is now essentially a royalty on profits," Brennan wrote in a letter to the Ways and Means Committee. "The reality, however, is that the net income royalty structure allows mining companies to claim significant deductions from their income such that there is rarely a 'profit' against which to levy the royalty.

"Most states and private owners realize a fair return from mining by requiring a net smelter royalty, which is royalty on the value of the mineral after it has been refined or smelted, but without deducting the costs of development, production and environmental liability," Brennan wrote. "A net smelter royalty provides greater revenue predictability because it is primarily a function of physical sales volume and price. These factors are much less variable than those used to determine net income."

Alaska and Nevada are the only states that have a net income royalty, Brennan told the committee.

Tim Bradner can be reached at