Mining law rewrite faces uphill battle in Senate

By Chris Baltimore

WASHINGTON (Reuters) - A bill passed by the House of Representatives last year that would impose stiff new royalties on hardrock mining companies will likely be toned down by the Senate, where pro-mining lawmakers hold more sway.

The House in November passed the Hardrock Mining and Reclamation Act of 2007, which would update mining laws that have been in place since 1872 and slap hefty new royalties on gold, silver, copper and other minerals mined on public lands.

If it becomes law, it would be the first major overhaul of the General Mining Law since President Ulysses S. Grant signed it 136 years ago to encourage Western land development.

However, key lawmakers on the Senate Energy Committee want to rewrite the legislation from scratch rather than use the House-passed version as a starting point.

Big mining concerns like Freeport-McMoRan Copper & Gold Inc and Newmont Mining could see royalties they pay to the federal government rise substantially if the House bill becomes law.

The House bill would levy an 8 percent royalty on the gross revenue from new hard-rock mining activities and impose a 4 percent royalty on existing operations.

Harry Reid, Senate majority leader whose home state of Nevada accounts for nearly 90 percent of U.S. gold production, has said he will block the 8 percent royalty assessment on new mining operations.

The Energy Committee will hold a hearing on the legislation on Thursday -- a precursor to the panel writing legislation that would still have to be approved by the full Senate.