State's mining industry loses bid to block petition

The mining industry lost an early legal bid Friday to keep Nevadans from voting on a ballot measure in the fall that would dramatically increase mining taxes in the richest gold mining state in the nation.

District Court Judge James Wilson Jr. refused to block Nevadans for Fair Mining Taxes from pursuing an initiative that would amend the state constitution to make mines pay taxes before instead of after deducting most expenses.

However, the judge in Carson City agreed with lawyers for the Nevada Mining Association who argued the initiative should be reworded to make it clear such a change would have tripled the proceeds tax on mines if it were in place in 2008 from about $92 million to about $284 million.

That means supporters will have to refile the petition and start over collecting signatures.

But that shouldn't be a problem, according to Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada. He said the conservationists and labor unions backing the effort remain confident Nevadans will get to vote on it in the fall.

The industry wanted the judge to throw out the petition on constitutional grounds, but Wilson said the Nevada Supreme Court has made it clear he can't rule on constitutional questions until after the voters have had their say, partly because measures that appear unconstitutional on their face sometimes can be implemented in a constitutional way.

Wilson also said voting on such ballot measures can be of value even if later struck down because "such a vote communicates clearly to the legislative branch of government the popular sentiment on an issue."

The judge said he plans to issue a formal order with more specific language on Monday but that it will include some the industry wanted added to make clear the tax would be applied "without regard for the necessary costs to extract the mineral from the earth," including digging, removing, processing, transporting and labor to produce it.

The initiative intended to help bring in new revenue to address state budget shortfalls would amend the constitution to require that mining companies doing business in Nevada pay not less than a 5 percent tax on their gross proceeds instead of the current law that allows a tax on not more than 5 percent of the net proceeds.

Nevadans for Fair Mining Taxes had already collected 12,000 signatures in a bid to obtain the 97,000 they need by June 15 to make the November ballot. But Fulkerson said the effort hadn't really gotten off the ground because of uncertainty surrounding the legal challenge.

"The industry's whole strategy is to tie things up and delay," Fulkerson said. "We'll refile the petition as soon as we get the order. We are going to work our tails off harder than ever."

The initiative would have to be approved in two different general elections and could not go into effect until at least 2012-13.

Gov. Jim Gibbons called the legislature into a special session in February to slash spending and find new sources of revenue to plug a $900 million shortfall in the state budget. They did, but they expect to face up to a $3 billion deficit over the biennium when they reconvene in 2011.

Bradley Schrager, a lawyer representing the industry, said after the two-hour hearing on Friday they will consider appealing to the state Supreme Court Wilson's refusal to block the entire effort on constitutional grounds. He said if the revised initiative goes to the voters, at least they will have a clearer understanding of what the change would mean.

"We're very pleased," he said.

Tim Hay, a lawyer for backers of the initiative, said he too was pleased.

"The judge didn't find any defects with the basic petition," he said.

The industry had argued initially for language that described the potential increase in terms of only the 300 percent without specific dollars.

"It's like winking and saying 'Here's a bunch other people's money. Would you like some?"' Schrager said. "In a sense, they have baited the hook."

But Don Springmeyer, arguing for the initiative, said the dollar figures were important to put them in perspective compared to the $1.84 billion in profits the mining industry produced from property in Nevada in 2008.

Springmeyer said the tax on gross proceeds amounts to special treatment for Nevada's mining industry, which ranks fourth in the world in gold production behind South Africa, Australia and China. He said retailers don't get to deduct their labor costs or casinos the cost of their slot machines before paying taxes.

"It essentially puts it on equal footing with other industries in the state," he said.