Royalties

Minerals for Free
To encourage the development of minerals in the west, the 1872 Mining Law doesn't charge a royalty to mining interests who take hardrock minerals (metals) from public lands.  Essentially, the mining law forces American taxpayers to give away billions of dollars worth of their natural resources without payment.

Other Extraction Industries Pay a Royalty
All other extraction industries -- primarily coal, oil and the natural gas -- pay royalties of 8 to 12.5% of the value of the minerals they extract from public lands. 

What are We Losing?
The taxpayer's loss is difficult to accurately estimate because the federal government no longer publishes the annual value of minerals extracted under the 1872 Mining Law.

However, in 2000 the Bureau of Land Management estimated that minerals worth $982 million were extracted from 1872 Mining Law lands.  Assuming a 10% royalty, taxpayers are conservatively losing $98 million per year due the Mining Law's lack of royalty. [1]

According the EARTHWORKS estimates, the Mining Law has forced taxpayers to give away over $245 billion in mineral value since 1872.  Assuming the same 10% royalty, that's a net loss of $24.5 billion for the U.S. taxpayer.

What is a Royalty?
What a royalty isn't: a tax.  A tax is a fee paid to the government where the government doesn't own the item being taxed.  For example, the sales tax on gasoline, or property tax, or income tax.

A royalty is a fee paid to the owner of something for its use.  The use can be nonconsumptive, as in the case with royalties to a songwriter.  Or it can be consumptive, as when oil companies pay a percentage of the value of oil taken from public lands to the owner of the oil, the American public.

American citizens own the public lands governed by the 1872 Mining Law, and they own the minerals contained within those lands.  Imposing a royalty on metals taken from public lands isn't raising taxes on the mining industry, it's common sense.

Net Proceeds vs Net Smelter Royalties
The mining industry's response to calls for a royalty is to agree.  However, they only agree to a royalty that won't force them to pay much of anything:  a net proceeds royalty.

Net proceeds royalties don't generate much revenue because they are a percentage of profits -- after all costs have been deducted.  The obvious perils of creative corporate accounting aside, net proceeds royalties are a bad idea because they subsidize inefficient production.  Why should a mining company pay less to extract public minerals if they have to pay more than the next company to extract those minerals?

Net smelter royalties, like the one in the Rahall reform bill, charge mining companies a fixed percentage of the value of the mineral extracted -- no matter how much it cost the company to mine the mineral.

For More Information

References

1) Mineral Policy Center, The Rahall-Shays-Inslee Mining Reform Bill.