MiningWeek Online
May 14, 2004 Volume 10, Issue 19

This Week's Issue:

• Senate agrees to energy tax incentives; also includes corporate AMT relief
• Precious metals capital gains provision added to FSC/ETI legislation
• Bush touts clean coal in WV speech
• Mollohan discusses issues during NMA visit
• Gerard: U.S. national interests served better by using coal, ‘most secure, plentiful fuel’
• Women’s Mining Coalition’s visit to Washington
• NAS panel will consider the impacts of environmental, health and safety regs
• EPA issues final nonroad diesel rule
• Former ACA president William Kelce dies
• SME Section gives Hoover Award to Greeley
• Newsbits

The Energy Tax Incentive Title not only contains $2.2 billion in incentives for clean coal technologies, but several other provisions of utmost importance to mining, including corporate Alternative Minimum Tax (AMT) relief and a change in the capital gains treatment on investments in precious metals that would end unfair tax penalties, offered by Sen. Harry Reid (D-NV) (see separate story, page 1).

Earlier in the day, the Senate voted 90-8 to cut off debate on S. 1637, in a vote that capped nearly five weeks of on-again, off-again discussions on the legislation, which repeals the FSC/ETI measure declared illegal by the World Trade Organization (WTO). The WTO ruled that beginning on March 1, the European Union (EU) could impose more than $4 billion of tariffs on U.S. exports unless the FSC/ETI provisions were repealed. U.S. exports, including those of NMA manufacturer members, were being detrimentally affected by the EU tariffs.

The clean coal tax incentives included in the measure are:

• Clean coal production tax credit – A production credit for electricity generated from facilities retrofitted, repowered or replaced with clean coal technology within 10 years of the date of enactment. The credit is available for 10 years to facilities with a capacity of 300 megawatts (MW) or less. Total capacity of qualifying units is limited to 4,000 MW.
• Advanced clean coal investment tax credit – This is a 10 percent investment tax credit for advanced clean coal technology. The incentives are limited to a total capacity of 4,000 MW. Qualifying facilities must meet certain capacity standards, thermal efficiency standards and emission standards. Those facilities that quality will also be eligible for production tax credits.
• Advanced clean coal production tax credit – This is a production tax credit for electricity generated from advanced clean coal technology units. The investment tax credit and production tax credit for advanced clean coal technologies are capped together at 4,000 MW nationwide. A facility must qualify for both credits to receive either credit.

The corporate AMT relief has three major provisions:

• AMT foreign tax credit – Repeals the 90 percent limitation on the AMT foreign tax credit, effective for taxable years beginning after 2004.
• AMT Net Operating Loss (NOLs) – Includes a three-year carryback of NOLs incurred in 2003 with the AMT 90 percent limitation on NOLs waived.
• AMT Credit in lieu of bonus depreciation – Allows taxpayers to increase their alternative minimum tax credit in lieu of claiming bonus depreciation.

The next step will be for the House, which previously passed energy legislation containing the clean coal incentives, to consider its version of the FSC-ETI bill. This legislation has not yet been scheduled for House floor debate. Once the House has acted, a House-Senate Conference would have to reconcile likely differences in the legislation.

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Precious metals capital gains provision added to FSC/ETI legislation

The provision is based on S. 611, which was introduced by Sen. Harry Reid (D-NV) with Sens. Allard (R-CO), Miller (D-GA) and Crapo (R-ID) as co-sponsors. Reid successfully persuaded Senate Finance Committee Chairman Charles Grassley (R-IA) and ranking Democrat Max Baucus (D-MT) to add the Fair Treatment for Precious Metals Investors Act to the legislation.

The measure would cut the capital gains tax for precious metals to match the rate for other types of common investments. Precious metals are currently classified as “collectibles” and taxed at the highest capital gains rate of 28 percent, while stocks and bonds are taxed at a lower rate of 15 percent for sales after May 5, 2003 (20 percent for sales before that date).

The Senate-passed measure will reclassify purchases of gold, silver, platinum and palladium bullion, in coin and bar form. It will not directly affect prices or tax rates for smaller amounts of precious metals used for commercial purposes, such as gold jewelry.

“Many people avoid investment opportunities in precious metals because of the extra tax burden,” Reid said. “Nevadans need diversified portfolios, and yet the government has designed tax laws that make one type of investment more costly than another. This bill will fix the problem – it will be good for investors and good for Nevada’s mining industry.”

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Bush touts clean coal in WV speech

“It is really important for this country to be wise about how we use our natural resources,” he told the audience at Parkersburg South High School. “And I have asked the Congress to pass a national energy policy so we become less dependent on foreign sources of energy. I’ve asked the Congress to quit playing politics and get a bill out of the United States Senate to my desk that includes the use of clean coal technologies to make sure we are less dependent.”

Bush added: “You’ve got a lot of coal here, and it’s an important part of our country’s energy mix. And we can use technologies to make sure that coal does what we want it to do, which is to power electricity so people can have reliable sources of electricity for their homes and their businesses.”

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Mollohan discusses issues during NMA visit

Rep. Alan B. Mollohan (D-WV) discussed election year politics, the economy, and energy legislation among other issues during a visit with NMA staff and members this week. Mollohan noted that it is a “tense environment” on Capitol Hill during the current presidential election year, and that when “power is in the balance and closely held, it will be competed for vigorously,” and that affects the pace and progress of legislation. Mollohan is a key member of the House Appropriations Committee and the ranking member on the Standards of Official Conduct Committee.

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Gerard: U.S. national interests served better by using coal, ‘most secure, plentiful fuel’

Speaking before a group of coal operators in Gilbert, WV, Gerard said the upcoming Presidential election would have a large impact on policies that will determine coal’s contribution to America’s energy future. “Whoever sits in the White House next January will be in a position to decide many of the battles we’ll face – and whoever does win could well owe his victory to West Virginia,” he said.

Gerard urged the audience to “weigh very carefully the records of the two candidates – not just what they say about the coal industry, but what they’ve done for and against it. For example, John Kerry supports clean coal technologies, just as President Bush supports tough mercury controls and backed tough standards for diesel fuel,” he added.

The differences between the candidates are “more subtle, but for coal they are decisive nevertheless,” Gerard said.

“Just as we couldn’t afford to relinquish our defense advantage in the Cold War, neither can we afford to relinquish our economic advantage in a global economy while our competitors retain theirs,” he said. “Our coal reserves are a powerful economic advantage for the U.S. As the world economy makes the transition to a hydrogen future, as many experts believe it will, we must ensure that this transition is orderly . . . that it is based on rational calculation of national interest.”

Gerard also praised the cap-and-trade approach proposed by President Bush and the EPA to mercury control as the best way to create a nationwide market for trading emissions credits. “It puts the self interest of an industry at the service of better air quality,” he said. “And it would ensure a level playing field among all coal types – so that no region would have an advantage in the marketplace over another.”

Gerard concluded: “Turning our backs on coal is not the way to proceed. Discouraging coal’s use in the absence of compelling evidence to do so is not wise public policy. Pursuing alternative fuel utilization at the expense of our most secure and affordable fuel would be foolhardy.”

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Women’s Mining Coalition’s visit to Washington

During a visit by 32 members of the Women’s Mining Coalition (WMC) to Washington last week (see Mining Week, 5-7-04) the group visited numerous Congressional offices to discuss such important mining issues as energy policy and the need for a national minerals policy. In this photo, the group is shown wearing shirts provided by P&H Mining Equipment on the Capitol steps with Rep. James Gibbons (R-NV).

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NAS panel will consider the impacts of environmental, health and safety regs

The National Academies of Science (NAS) Institute of Medicine has established a panel to consider how federal agencies calculate the benefits of environmental, health and safety regulations. The ultimate goal of the new panel is to offer input on how to improve the quality of agency estimates of regulatory costs and benefits.

Formation of the panel was a priority of Dr. John Graham, administrator of the Office of Information and Regulatory Affairs within the office of Management and Budget (OMB). That agency recently issued revised guidance to federal agencies instructing them on how to prepare regulatory impact statements. Federal agencies are required to prepare detailed cost-benefit assessments for all economically significant regulations.

The panel is expected to report its recommendations in 2005.

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EPA issues final nonroad diesel rule

The Environmental Protection Agency (EPA) this week released the final Clean Air Nonroad Diesel Rule, which it said will cut emissions from construction, agricultural and industrial diesel-powered equipment by more than 90 percent, and will remove 99 percent of sulfur in diesel fuel by 2010. These EPA rules are known as Tier IV level of emissions regulations and require exhaust after treatment devices applicable to off-road diesel-powered equipment.

The final rule has not been published in the Federal Register but is available along with other supporting information on the EPA web site at www.epa.gov/nonroad-diesel/.  This site contains a pdf file of the preamble and the final rule.

The sulfur content of diesel fuel will be cut to 500 ppm in 2007 and 15 ppm by 2010. For engines used in mobile machinery, EPA is deferring a decision on setting after treatment-based NOx to allow additional time to evaluate the technical issues related to adapting NOx control technology to these engines and applications.  EPA will continue to evaluate the long-term NOx standard for mobile machinery over 750 hp and are currently considering further action in the 2007 timeframe.  Particulate matter after treatment – based standards will start in 2015, with no prior phase-in.

Engine manufacturers said they will focus on developing the improved engine technology and pollution control systems needed to meet the new, more stringent standards. The Engine Manufacturers Association said: “Because nonroad engines must operate under harsh conditions, meet unique performance requirements and vary over a wide range of engine sizes and power requirements, meeting EPA’s new emissions standards will be no simple task and will require a large development effort on the part of engine and emissions control equipment manufacturers. However, given time to adapt the technologies and lessons learned from the on-highway engine market to nonroad engines, we are confident that manufacturers will be able to provide the emissions reductions called for in the regulation.”

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Former ACA president William Kelce dies

William M. Kelce, former president of the Alabama Coal Association who retired on June 30, 2003, passed away on Thursday, May 6, 2004, at the age of 70.

Prior to retiring last year, Mr. Kelce had served as the Association’s president since its formation in 1972 and devoted his life’s work to the coal industry. The Kelce family has been involved in coal mining since the mid-1800s, and he was the last member of the Kelce family to retire from the coal industry.

After returning from four years of service during the Korean War, Mr. Kelce started working with Peabody Coal until 1969 when he left to form Arch Mineral Corporation with Merl Kelce, Hubert Hagen and Guy Heckman. Mr. Kelce was Vice President of Operations until 1971, when he moved to Alabama. “The greatest people in the world are coal miners, and the best place in the world to live is the state of Alabama,” said Mr. Kelce at that time.

He was selected by his state association colleagues as the first Chairman of the Regulatory Assistance Program when it was established in 1985, and was turned to again on several more occasions to chair the effort. The Regulatory Assistance Program is a cooperative effort of the NMA and state associations to address regulatory issues arising in the field.

Among other important industry positions, he served on Executive Committees and Boards of Directors for the Mining & Reclamation Council of America, NMA’s predecessor organization – the National Coal Association, and the National Coal Council.

Mr. Kelce was preceded in death by two daughters – survivors include his wife, Shirley A. Kelce, of Vestavia Hills, AL; three sons; a stepdaughter; 14 grandchildren; three great-grandchildren; a brother, niece and nephew. Funeral services were Monday, May 10, in Homewood, AL.

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SME Section gives Hoover Award to Greeley

The Washington, D.C. Section of the Society for Mining, Metallurgy and Exploration (SME) presented its highest honor, the Herbert C. Hoover Award, to Michael N. Greeley at its luncheon meeting on Tuesday of this week.

Greeley, who has served the section as its chairman, and in recent years as councilor, works as Program Manager for Mineral Materials and Solid Leasable Minerals in the Minerals and Geology Division. He began his professional career in 1969 as a project geologist with AMAX Exploration, Inc. and later joined Anamax Mining Company as the Senior Mine Geologist, and later was Chief Slope Stability Engineer for Anamax’s Twin Buttes open pit copper mine. In 1977 he joined the Arizona Department of Mines and Minerals Resources, as a mining engineer. In 1988, Greeley became the State Mineral Officer for the U.S. Bureau of Mines for Arizona, New Mexico, and Utah. In 1992, he relocated to Washington, DC where he was Program Manager for Mineral Resource Assessments on National Forest System and Indian lands.

Greeley has been heavily involved with the Society for Mining, Metallurgy, and Exploration serving as Chairman of the Tucson Section and later the Washington, DC Chapter where he remains a tireless member. He has been an active supporter and volunteer for SME’s role in judging local area Science Fairs and with the National Science Teacher’s Association Convention’s Minerals Educational Booth.

Greeley presented an overview of the mining history of Arizona, based on research and photos collected from books he has co-authored on the subject. He noted that Arizona is rich in mining history, much as other western states. Greeley provided a photo presentation on Arizona’s mining history from the early 1800’s to early 1900’s, with photos of mining companies and mines, mining towns, and many of the founding members of Arizona’s mining industry. Greeley also commented that Arizona copper mines played a significant role in the First World War providing 3 billion pounds of copper toward the war effort. During the Second World War, Arizona provided approximately 31% of the Nation’s copper.

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Newsbits

The Michelin Earthmover Group is launching a new training program to raise the awareness of tire safety issues at mines and quarries in North America. The “Earthmover Tire Safety Program” is designed to explain safety best practices to managers, maintenance personnel, equipment operators and support staff and will be delivered by MSHA certified Michelin field sales team members or by the safety team at the mine. For more information, visit www.michelinearthmover.com . . . . Hecla Mining Co. has announced plans to develop the Mina Isidora gold mine on the Block B lease in the Callao gold district. Production is expected as early as the end of 2005 . . . . Two executives of American Electric Power have been recognized as “key women in energy in the Americas”; the program is sponsored by Houston-based energy consultancy RaderEnergy and recognizes women who have made significant contributions to the energy sector or related businesses. The executives are Holly Koeppel, executive vice president-commercial operations, and Melinda Ackerman, senior vice president-human resources . . . . Donaldson Co. Inc. said its new, patent pending, disposable exhaust filter for use on non-permissible mining equipment has been accepted by the Mine Safety and Health Administration for meeting permissible and n0n-permissible (cooled and non-cooled) application criteria. The new filter enables mine operators to meet key emission standards for diesel particulate matter, the company said.

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