News and analysis from The Center for Michigan •
©2015 Bridge Michigan. All Rights Reserved. • Join us online at

Original article URL:

Public sector/Quality of life

Mining tax could spur more U.P. mining

State lawmakers and Gov. Rick Snyder are poised to approve a new tax structure on metallic mining operations that could spur development of new mines — like the controversial Eagle Mine near Marquette — across the western Upper Peninsula.

The state House of Representatives, on Nov. 29, approved legislation authorizing a 2.75 percent severance tax on nonferrous metallic mining operations. It would replace local property taxes and most other states taxes that metallic mines currently pay; the Senate and Gov. Rick Snyder are expected to approve the tax by the end of the year.

The full package, which includes establishing a rural development fund, covers House Bills 6007-6012.

State officials said the new tax structure on metallic mines won’t reduce overall tax revenue for schools or local units of government, or impose significantly higher taxes on mining firms.

State Rep. Matt Huuki, a Republican from Atlantic Mine who sponsored the legislation, said the new tax structure would make it financially easier for companies to open new mines in the job-starved Upper Peninsula. The reason: A severance tax delays taxes until a mining firm is producing minerals and generating revenue.

“With a very straightforward taxation system, investors will feel very secure in investing in the mineral commodities we have in the Upper Peninsula,” Huuki said.

Michigan Department of Natural Resources spokesman Ed Golder said the Snyder Administration believes the severance tax will “benefit local communities, help draw investment to Michigan and support long-term economic development in rural communities.”

Officials at London-based Rio Tinto, which owns the Eagle Mine, also support the severance tax, spokeswoman Deborah Muchmore said.

Too good a deal for miners, say bill critics

Critics, however, say the 2.75 percent tax was too low and contained several loopholes.

Previous coverage

Mines begin digging into U.P. free of state tax (Nov. 1, 2011)

Taxation on resources varies widely among states (Nov. 2, 2011)

Mining boom roils Upper Peninsula (Nov. 3, 2011)

“The Huuki legislation is a good concept, but we feel the proposed tax rate of 2.75 percent is much lower than it should be and gives too many exemptions for transportation and regulatory compliance costs,” said Brad Garmon, director of conservation and emerging issues for the Michigan Environmental Council.

Garmon also said the severance tax should not be rushed through a “lame duck” legislative session. Huuki, for instance, was voted out of office last month and will leave the Legislature at the end of 2012.

“We need to have more extensive public discussions about how severance tax money would be allocated,” Garmon said. “It’s too important a matter to rush through the (Legislature’s) lame duck session.”

Huuki’s legislation calls for local units of government to receive 65 percent of revenue generated by the metallic mining severance tax. The state would receive the remaining 35 percent, most of which would be used for economic development activities in rural areas.

The mining severance tax is similar to the tax that oil and gas drillers pay in Michigan. The 2.75 percent tax rate is comparable to several other states except Florida, which levies an 8 percent mining severance tax.

Most of Michigan’s $2 billion mining industry is currently exempt from severance taxes the state levies on other extractive industries, such as oil and natural gas producers. The lone exception is low-grade iron mines, which pay a severance tax of 1.1 percent per ton of iron extracted.

The new severance tax would apply to all metallic mines in Michigan.

A severance tax requires mining firms to pay taxes on the sale of minerals to smelting firms. Currently, mining companies in Michigan pay property taxes as soon as they acquire land, which can be years before a mine produces any metals or revenue.

Huuki’s legislation was spurred by Rio Tinto’s controversial Eagle Mine, which is expected to extract 550 million pounds of nickel, copper and other metals from state land near the headwaters of the Yellow Dog and Salmon Trout rivers. The Eagle Mine won’t produce metals or generate revenue until 2014, but the company has already paid $4 million in property taxes on the facility, Muchmore said.

Rio Tinto is one of several foreign corporations developing or studying the possibility of opening new metallic sulfide mines in the western U.P., according to state records.


Metallic sulfide mines are controversial because the rock that contains valuable nickel and other metals contains high levels of sulfides. When exposed to air and water, those sulfides create sulfuric acid, which has polluted rivers near numerous metallic sulfide mines around the world.

The Eagle Mine has divided Upper Peninsula residents, sparked legal challenges and acts of civil disobedience at the mine site. Critics contend the environmental risks associated with metallic sulfide mines outweigh economic benefits that usually last a few years.

The U.P. has a rich mining history that dates back more than a century, but most of the region’s copper and iron mines closed decades ago. The industry’s decline decimated many communities and left the region struggling to create new jobs.

Data recently compiled by the community development group Northern Initiatives found that the jobless rate in most U.P. counties is well below the state average of 9.1 percent in October. However, all 15 U.P. counties had a median household income in 2009 below the state and national averages, Northern Initiatives reported.

Huuki said improved mining technology and the region’s abundant minerals have made metallic mining the region’s best hope for new, high-paying jobs.

“Numerous companies are investing millions of dollars and researching the minerals we have in the U.P. and now we have a tax structure that makes us competitive worldwide,” Huuki said. “I think we have a great opportunity to see the U.P. recover economically.”

Jeff Alexander is owner of J. Alexander Communications LLC and the author of “Pandora’s Locks: The Opening of the Great Lakes – St. Lawrence Seaway.” He’s a former staff writer for the Muskegon Chronicle.

1 comment from a Bridge reader.Add mine!

  1. George Moroz

    Why shouldn’t the severance tax rate for mineral extraction be the same as that charged for oil and gas extraction? Doesn’t it make sense that at least a portion of the severance taxes collected from those who extract and deplete Michigan’s natural resources be required to be reinvested in stewarding, protecting and enhancing Michigan’s naural, cultural and heritage resources? Use at least some of the taxes collected from resource depletion activities to reivnest in the state’s unique, but finite inventory of resources.

    Perhaps a portion of an increased rate in the severance tax proposed for mineral extraction could serve as the dedicted and permanent source of funding for the Pure Michigan tourism campaign and other aspects of the Michigan Tourism Strategic Plan that specifically relate to the protetcion and stewardship of our state’s inventory of natural, cultual and heritage resources.

Leave your comment...

Your email address will not be published.

Currently on Bridge

An Earth Day pitch: When you hang up the phone for good, toss it the right way

Michigan’s roads affect everyone, so a 'yes' vote on Proposal 1 makes sense

‘Diplomacy Begins Here’ conference aims to illuminate international relations

What NOT to post on Facebook: Jokes about prison rape, when you’re in charge of preventing prison rape

A program to give young offenders a second chance is sending many to prison

Similar accounts in teen prison rape suit pose challenge to state's defense

‘New fish’ ‒ One teen inmate’s account of sexual assault

Early learning summit in June could impact Michigan’s children

Money Smart Week: Be penny wise, and pound savvier

Plan B or no Plan B, here’s what happens if road proposal fails

The political tale behind the selling of Proposal 1

A Bridge primer: Untangling the pothole promise of Proposal 1

Who supports, and opposes, Proposal 1

Let's rebuild Michigan through its greatest asset: its water

Could a public boarding school model work in Detroit?

Coalition supporting Detroit schools a step in the city’s road back

Chasing fads? Today’s schools are struggling too much for that

For one Michigan legislative staffer, an hour or two in the spotlight

A cull is a kill, and it’s an overreaction to deer ‘problem’

Lack of college guidance keeps poor and rural students from applying

Those who can, do – and get their hands ‘dirty’ in the process

For one Detroit mom, a complicated path to employment

Detroit by the numbers – the truth about poverty

Michigan should require dental screening for all children entering kindergarten

Where in the world is the Center for Michigan?

After two years, hard to call ACA anything but a success

Bridge’s Academic State Champs emphasizes all the wrong measurements

A graying population poses challenges for Up North counties

Up North, isolation impedes health care for seniors

Enbridge oil pipes and the Straits of Mackinac: Too risky to ignore

Not bigger government, but better services when Community Health and Human Services merge

Two Michigans gaze across a widening gap

In northern counties, workers and business find each other lacking

Hidden poverty stalks a Pure Michigan setting

Postcard: How a git-’er-done spirit helps one rural school district

Postcard: When elk is for dinner

Postcard: Luxe life at Bay Harbor reflects changing economy

Postcard: A roof and a bed

Invest in non-partisan journalism.

Donate to The Center for Michigan. Find out why.