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Another Cemex stall?

Request for cost estimate pending 2 months after hearing on latest mine-halting bill

Posted: January 19, 2014 2:00 a.m.
Updated: January 19, 2014 2:00 a.m.
 

Two months after a congressional subcommittee determined it needs a cost estimate before considering a bill to block a mega-mine in Canyon Country, the request to conduct the estimate hasn’t been made, The Signal has learned.

In November, the Senate Subcommittee on Public Lands, Forests and Mining heard testimony on the bill, S. 771, that would swap federal land near Victorville in exchange for mining contracts in Soledad Canyon issued by the Bureau of Land Management. The subcommittee ordered the bill to the Congressional Budget Office to “score” it – that is, determine the fair-market value for the 56 million tons of sand and gravel that could be removed from the land under the contracts.

The “score” will determine how much compensation Cemex would give up by not mining in the area and help legislators insure no cost to the federal government in the transaction.

“We’re hopeful that the Senate Energy and Natural Resources Committee will receive a ‘score’ from the Congressional Budget Office in the first quarter of this year,” Cemex spokeswoman Sara Engdahl told The Signal last week.

“The scoring assessment will, of course, look at all factors, including the value of the aggregates and the associated royalties,” she said. “Cemex prefers not to offer any guesses as to the outcome but looks forward to the CBO’s assessment, as it is a necessary step in moving the process forward.”

Royalties are fees that would be paid to various agencies to operate the mine. Among the recipients of royalties would be the Bureau of Land Management.

Long-running battle

Santa Clarita officials and Cemex locked in a head-to-head battle over the issue of the mine more than 10 years ago, and Rep. Howard “Buck” McKeon, R-Santa Clarita, repeatedly introduced legislation to block the mine. His bills failed, never even making it to a House subcommittee hearing.

City officials say the mine would: increase congestion, especially on Highway 14; compromise Santa Clarita Valley air quality; harm protected native species; and lower residents’ quality of life.

Sen. Barbara Boxer, D-Calif., sponsored the latest three mine-blocking proposals. The bill now under consideration, introduced in April 2013, calls for Cemex to be fully compensated for the loss of revenue for the contracts. Cemex supports S. 771.

But any expectation of the appraisal — or scoring — being done promptly appears unrealistic. The scoring request from Sen. Manchin’s Subcommittee on Public Lands, Forests and Mining has not been made.
Asked how long the CBO needs to “score” the bill, the spokeswoman said she does not know.

Royalties

A major sticking point on approval of the bill will be royalties.

When it comes to assessing royalties for nonmetallic minerals such as the aggregates that would be produced by the Cemex mine, royalties are calculated on a cents-per-ton-mined basis, according to Colorado-based Pincock, Allen & Holt, a consulting and engineering firm that serves the international mineral resource industry.

Agreements over royalties often contain provisions for adjustments in rates according to some published inflation/ deflation indicator such as the Producer Price Index, the engineering firm says in a paper.

Royalties are spelled out in the two contracts the Bureau of Land Management issued to Transit Mixed Concrete — the original owner of the contracts — and specifically a minimum royalty to the United States of $28 million over the 20-year life of the two contracts, said Mike Murphy, intergovernmental relations officer for the city of Santa Clarita.

They are calculated by multiplying 56 million tons of extracted land by a royalty rate of 50 cents per ton.

But Bureau of Land Management officials say the royalties must be reassessed to $1.50 a ton to reflect fair-market values.

“Over the entire 20-year lifespan of the two contracts, utilizing the 50-cents-per-ton figure for the first four years and then $1.50 per ton over years five to 20, the overall royalty is currently estimated at $77.35 million,” Murphy said.

City role

Cemex has proposed the city be responsible for paying those royalties, Murphy said.

“We have not given them a response to that,” he said. “It is difficult to have a realistic sense of all the numbers that would be within the complex overall calculation.”

During the Senate subcommittee hearing on the Cemex bill, Steve Ellis, acting deputy director for the BLM, said canceling the Cemex contracts would amount to a loss of millions of dollars in royalties for the federal government.

Preventing any future mining on the site, another aspect of Boxer’s bill, could cost the federal government an estimated $450 million in royalties, Ellis said.

Congress has until the end of this year to act on the bill.

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