A Framework for Federal Mining Reform: Impact Planning, Benefits Sharing, and Asset-Based Revenue Management

The clean energy transition will require new mining operations throughout the world to extract the metals and minerals used in batteries, renewable energy generation and transmission, and other key clean energy technologies, including here in the United States. The energy transition from fossil fuels to renewable energy is effectively moving from a fuels-based energy system to a materials-based one. Building the electric vehicles and their batteries, wind and solar farms to generate power, and other necessary infrastructure will require new mining for the necessary raw materials.¹ And it will take substantially less mining and drilling for the fuels required to power the status-quo fossil fuel energy system year in and year out.²

Mining in the United States is still governed by the same century-old laws and regulations that have consistently failed to project and benefit mining communities. Historically, a large share of the value of minerals extracted from the ground has been exported out of rural places, leaving host communities and workers with little to show for decades of mining.

As the energy transition progresses, the U.S. Congress and Biden administration have opportunities to fix extractive economies and make sure that mining communities benefit from new activity where it occurs.³ Modernizing domestic mining rules to meet national energy and climate goals and to deliver benefits to the local communities that host mines could happen legislatively (e.g., Congress could update the 1872 mining law)⁴ and through administrative action (e.g., federal agencies could incentivize or require community engagement through rulemaking and public spending).⁵ Drawing on state and local examples, this report presents a framework for community-oriented federal mining reform that includes three principles: early impact planning and mitigation; community benefits agreements; and long-term savings and investment of nonrenewable revenue.

New domestic mining activity affects rural communities in a variety of ways, including impacts on local services and infrastructure, stress on local staff and resources, and potential for significant environmental pollution. Limited policy guidance, disproportionate information between multinational mining corporations and local governments, and the uncertainty inherent to mining operations put communities at risk.

Salmon, Idaho, exemplifies the challenges faced by rural communities hosting mining operations and why the community-oriented federal mining reform proposed in this report could work to resolve these issues.

Salmon is a rural, remote community situated along the Salmon River in Lemhi County. Nestled in this rugged landscape, Salmon and nearby communities are marked by an abundance of state and federal lands: 92 percent of the county’s land is public.⁶ The town’s economy relies on these surrounding lands and resources for jobs, such as timber, mining, tourism, and agriculture; for recreation; and for revenue to support local schools, services, and infrastructure. Ties to the land and a resource-based economy shape a unique and rich rural quality of life but also bring instability and uncertainty through recurring boom-and-bust cycles. Despite its public assets, Lemhi County’s economy has grown relatively slowly in recent decades, and the county has relatively low wages, low levels of education, and high poverty rates compared with the United States as a whole.⁷

When the new owners of an idle cobalt mine situated on public lands outside Salmon announced their intentions to reopen the operation, local community leaders from Salmon Valley Stewardship and area economic development associations in Lemhi and Custer counties began to negotiate with the mining company Jervois to develop a community benefits agreement (CBA). The CBA seeks to share information and advance the long-term needs and vitality of their community, and it would ultimately establish a permanent fund, seeded with proceeds from the mine, that can ensure lasting benefits from the one-time extraction of the public’s nonrenewable resources.

The recent announcement by Jervois that they were pausing construction due to low cobalt prices,⁸ and the more recent announcement of a $15 million grant from the U.S. Department of Defense to Jervois for exploration and assessment of a cobalt refinery,⁹ is common for modern metal mines that often expand, idle, or abandon operations based on changing market conditions, domestic policy, or regulatory compliance. The announcement reinforces the uncertainty and stress that mining communities can face when mines start and stop, when they are sold among mining companies, or when other factors affect operations. For Salmon, the sudden halt was just the latest iteration in a series of start-stops stretching back nearly 20 years. Despite the uncertainty and delay—or perhaps because of it—the process of negotiating a CBA sets the community up to secure benefits from future operations should they occur.

Salmon is exemplary but not unique. Residents in rural and Indigenous communities around the country want a say in how things will be done in their community; they want to have input into the process that will make decisions affecting their lives. But not all modern mining companies understand the importance of working with local people, organizations, and companies. Host communities in rural regions face a more powerful and patient global mining industry that has greater financial resources and expertise and longer timelines: A complex and lengthy permitting and review process with multiple starts and stops and changing ownership can exhaust and divide community volunteers and advocates.

Negotiating a CBA offers mutual benefits. The mining company expects to secure a social license to operate in a particular place, which can speed permitting and construction by avoiding lengthy lawsuits. The host community expects to have standing and voice in project design and operations and to share in the project returns that can be invested in local assets that build resilient and equitable economies. And CBA negotiations happen alongside the mining operator’s necessary steps to open a mine, costing little or no time on the front end and saving lots of time—and avoiding unnecessary costs—on the back end.

In Salmon, the burden of negotiating with Jervois fell to community leaders and volunteers with limited resources. Negotiating a CBA requires staff capacity, expertise, and resources. Communities with limited capacity may not know what to ask for or how to ask, or perhaps they will concede to the mining companies’ desires just to secure any promised benefits. The ever-present uncertainty around the timeline and duration of mining projects adds another layer of complexity.

In Montana, the state’s Hard-Rock Mining Impact Act gives communities standing—and funding—to negotiate with companies to develop and finance community impact plans.¹⁰ Montana also collects a mineral tax, part of which is deposited in local funds available for economic diversification investments when mines close. This regulatory approach has its origins in Montana’s history of mining, which left a toxic legacy, abandoned workers, and hollowed out communities.¹¹ The laws and fiscal policies provide communities with the leverage and resources necessary to address local impacts, including new housing needs, increased school enrollment, demands on public health services, or additional maintenance on roads and bridges that facilitate construction and mining activity. Long-term community funds ensure one-time extraction activities contribute to assets that will help diversify economies long after the mine closes.

When it comes to mining operations, the federal government, by comparison, has no strategy or policies in place to give voice to communities, to pay for local impacts so they do not fall on existing taxpayers, or to help communities ask for investments—such as workforce training, affordable housing, and community funds—that share the benefits of successful projects and build more resilient economies in mining regions. The federal government does not collect royalties in most cases when critical minerals are extracted, leaving little to show for the depletion of nonrenewable public assets. This regulatory void contributes to inequality and environmental injustice, as some higher-capacity communities are able to negotiate with mining companies more successfully to address impacts and secure benefits, while lower-capacity and disadvantaged communities are more likely to suffer long-term harms from extraction.

So far, proposed legislation in Congress fails to mention community benefits or long-term revenue strategies. The Biden administration’s Interagency Working Group recommendations, which were due last November, are still pending at the time this report was prepared.¹² This report draws on the experience of communities such as Salmon and the policies adopted by mining states to propose a new federal policy framework for legislative and administrative reform focused on three needs:

• Early impact planning and mitigation: Upfront, mine construction brings workers and industrial activity to small communities who may not have the infrastructure, workforce, or capacity to respond to impacts. It is essential that communities have time and resources to anticipate and plan for mining and that mines get up and running without undo impact to roads, public safety, housing, and schools. Mining reform should require jointly developed and funded impact plans before and during mining permitting.
• Community benefits agreements: Federal law must also assist communities with long-term benefits—strategies and investments that go beyond impact mitigation to leverage the one-time opportunity of a mine into broadly shared and diversified economic development. A community benefits agreement begins with a locally led strategy, supported with federal capacity grants, technical assistance, and training resources, for what the community wants to gain after the mine closes.
• Asset-based revenue management: Finally, boom and bust is too often accompanied by depleted government budgets, unsustainable debt liabilities, and fiscal crises. When mines close, state and local governments may have no permanent or stable financial resources as an outcome of decades of mining. Creating a permanent fund to ensure long-term revenue stability is essential to sustain services and infrastructure that facilitates economic diversification and community well-being.

Federal mining reform must address critical issues related to water, conservation, trade, supply chain security, and more. For example, bonding for environmental reclamation remains fraught. These issues are beyond the scope of this report. Here, the focus is on the needs of communities, from upfront engagement and impact mitigation to post-mine closure economic diversification and resilience.

New hardrock mineral mines,¹³ like all industrial-scale projects, affect host communities in varied and unpredictable ways. Communities are particularly vulnerable to impacts early in the mine life, when local governments may be unprepared to handle a large influx of workers and construction activity and the corresponding demand on roads, public safety, housing, and schools.¹⁴ Furthermore, the inherent challenges and technical difficulties in developing a modern mineral mine often mean that the process takes years after permitting approval. This lag period results in compounding crises for host communities: Governments receive little revenue from mining operations but often must pay for costs associated with growth, such as infrastructure upgrades and public service expansions. Federal mining policy needs to develop proactive mechanisms to support communities in planning for and mitigating the initial impacts of new mines.¹⁵

Early phases of mining burden public infrastructures and services

Temporary impacts typically stem from the construction of new mines. Examples include:

• Increased traffic and pressure on transportation infrastructure, such as:
  • Transporting heavy equipment that may exceed the existing design capacity of area roads
  • Additional private vehicles traveling to and from the mine site
  • Increased demand for regular use of local or regional airports
• Incoming population of construction workers. New mine construction often relies on crews and equipment sourced from outside the immediate area who may be in the community for months or several years. Secondary impacts of a transient construction workforce include:
  • Pressure on short-term and vacation rentals and housing in communities
  • Increased demand on the hospitality sector, such as hotels and restaurants
  • Increased demand for public safety services, such as policing and emergency medical services
  • Increased school enrollment and demands on child care providers
  • Increased demand for—and use of—area recreational sites and public land

Costs associated with the impacts from mine development should not fall on taxpayers

Impacts, such as those listed above, can impose expenses on local governments and service providers. These costs should not be shifted onto state and local taxpayers but should be paid for by the mine developer. For example, Montana’s Hard-Rock Mining Impact Act (HRMIA), passed in 1981, illustrates how to accomplish this objective.¹⁶ The HRMIA requires private mine developers and local officials—county governments, cities, local school districts, and special districts—to jointly develop a community fiscal and economic impact plan as a condition of the developer receiving a permit to operate in Montana.¹⁷ The mine developer must pay for increased local government costs—operations and capital investments—identified in the plan. The mine developer can make payment through grants or contributions, prepaid taxes, bonds, or other nonfinancial assistance, such as staff and consulting services or direct construction of infrastructure.

The developer submits the impact plan to a Hard-Rock Mining Impact Board, which administers the HRMIA and is authorized to adjudicate disputes between communities and mining companies. The five-member board is appointed by the governor and must include Montanans who represent the mining and financial industries, local governments in areas affected or expected to be affected by mining, and the public at large.¹⁸ By requiring approval from the impact board, the HRMIA equalizes power dynamics between communities and the mining company.

An impact plan identifies the additional local government services and facilities required by mine development and operation as well as related population growth. Local governments must use funds prepaid by the mine developer to pay for community impacts directly associated with the mine and explicitly identified in the impact plan. Once mining operations have commenced, and local governments begin to realize property taxes and other direct revenue streams from the project, funds are credited to the mine developer via tax rebates.

In addition to addressing initial impacts during mine construction and early operations, communities also need the ability to negotiate for and secure lasting benefits stemming from new mines. Community benefits agreements (CBAs) are a common mechanism for going beyond impact mitigation to build community assets and resilience so that host communities can leverage the one-time opportunity of a mine into broadly shared and diversified economic development.

A community benefits agreement begins with a locally led strategy for what the community wants to be after the mine closes. Ideally, this strategy identifies place-based opportunities and assets that communities would otherwise be unable to realize or secure. CBA initiatives might include infrastructure improvements, local procurement provisions, minimum local hire thresholds and workforce training, and programs that build community capacity or resilience in the long run.¹⁹

Benefit agreements in practice

It is not uncommon for communities and local governments to negotiate with mining companies to implement ad hoc programs or initiatives that benefit stakeholders affected by a new mine. Here are three such initiatives:

1. The Golden Sunlight Mine in Southwest Montana has worked with a local economic development corporation to create a business park that leases mine-owned land at a low cost to area businesses.²⁰ The program was developed explicitly to help diversify the local economy to prepare for eventual mine closure.
2. Salmon Valley Stewardship helped negotiate an agreement with Jervois that would deposit a portion of revenue from mining operations in a permanent fund.²¹ The fund would be invested to earn income, and it would make grants available to the community for economic development and other purposes.
3. Lundin Mining, owner of the Eagle Mine in the Upper Peninsula of Michigan, has developed a small-business development initiative called Accelerate UP to proactively address economic development and diversification.²² The idea for the program stems from community focus groups where residents suggested a strategic initiative to avoid economic dependence on the new mine. Lundin has also helped invest in community trail systems that add to a quality of life essential to attracting and retaining families and workers, benefiting the company and the local business community.

Community benefit agreements are considered best practice for helping communities articulate local needs and benefit strategies and negotiate with mining operations and other major industrial investments internationally and, increasingly, domestically. For example, the U.S. Department of Energy incentivizes developers receiving grants funded by the 2021 Infrastructure Investment and Jobs Act (IIJA) and 2022 Inflation Reduction Act (IRA) to include a community benefits plan to “help ensure broadly shared prosperity in the clean energy transition.”²³ In addition, the Bureau of Ocean Energy Management (BOEM) incentivizes CBAs by offering credits to developers bidding on offshore wind lease sales.²⁴

Examples from other nations suggest CBAs are most effective when they are regulatory, equalizing power dynamics between communities and companies; when all stakeholders are engaged; and when communities receive funding and technical assistance to develop capacity to negotiate effectively.

CBAs should focus on community development and be clearly distinguished from impact mitigation. Where possible, agreements associated with mining and other extractive activities should prioritize building local capacity and economic benefits. Capacity is the inherent knowledge, skills, and resources that enable communities to meet their immediate needs and prepare for future needs. Building capacity can include training, funding, and networking with local leaders and institutions.

And importantly, CBAs need to be explicitly tied to the project—not a specific developer—to protect the agreement because of the trend in modern metal mining for mines to have several owners during their lifespans.

The federal government currently has no strategy to save or invest revenue from leasing nonrenewable fossil fuel or minerals. The General Mining Act of 1872, which still governs all hardrock mining on national public lands, fails to collect a royalty. In instances where royalties are collected from federal leasing—for example, in fossil fuels²⁵—fiscal policies often reinforce dependence on the resource as opposed to economic diversification.²⁶ As a result, too often, host communities fail to leverage resource extraction into long-term prosperity and instead struggle with volatile revenue and growing debt. And once resource extraction ends, communities are left with too little to show for decades of wealth extracted and exported to outside markets.

To manage the time-limited and uncertain opportunity associated with nonrenewable resource mining, best practice is to collect taxes and royalties when resources are extracted and to save and invest mining revenue in permanent assets that benefit current and future generations.

The state trust land model in the United States provides a framework for federal revenue management. Congress granted trust lands to states as they entered the union to be managed to benefit public schools and other public institutions. This “fiduciary” obligation includes a mandate that the value of the initial land grant, including land and mineral rights, be protected in perpetuity. In practice, when state trust land managers sell physical assets—including land and nonrenewable resources such as fossil fuels and minerals—the proceeds are deposited in permanent funds. The nonrenewable resource is replaced with a permanent financial asset that can be invested to earn income for current and future generations.

The New Mexico State Land Office offers an exemplary case. New Mexico manages substantial oil and natural gas resources on state trust lands in the Permian Basin and has invested all the royalties it earns from leasing fossil fuels into the Land Grant Permanent Fund (LGPF). The LGPF is now worth $25.8 billion, as of January 2023,²⁷ and will distribute more each year to the New Mexico State General Fund than any single year of leasing revenue. The principal in the LGPF is also available to the New Mexico State Investment Council to invest in renewable energy projects in New Mexico, leveraging public capital to advance the state’s energy, climate, and economic development goals. New Mexico’s actions provide multiple benefits to communities: stable and permanent payments that support local schools and other education and social services, capital to invest in transitioning the energy sector, and the flexibility to determine their energy and economic future with less risk to budgets and services.

Several proposals and regulations to reform federal mining law have already been introduced. For example, Rep. Raúl Grijalva (D-AZ) and Sen. Martin Heinrich (D-NM) introduced the Clean Energy Minerals Reform Act in 2023 to “address major environmental justice concerns, protect the environment, and ensure a fair return for the American people.”²⁸ The act would impose a royalty on hardrock minerals extracted from federal lands and create a process by which agencies and state, local, and Tribal governments could propose areas that should be withdrawn from mineral exploration and mining. Effectively, environmental justice concerns would be addressed by blocking some mining proposals and using royalty income to clean up legacy mining pollution and waste. There are no provisions to address other types of community impacts or community benefits or to save and invest revenue on behalf of mining communities.

To date, reform proposals, such as the Clean Energy Minerals Reform Act, do not appropriately address community impacts or community benefits. The framework below includes three integrated components of community-oriented mining policy that should be considered as reform conversations proceed.

Early impact planning and mitigation

Following the Montana example, federal mining policy should ensure that large-scale mining operations will not burden local taxpayers, result in unmitigated impacts to local services and infrastructure, or weaken the capacity of local institutions. To be successful, early impact planning and mitigation should include:

• Local impact plans should be required to detail governmental and nongovernmental community services, infrastructure, capacity, and assets likely to be affected by activity associated with mine exploration, construction, and operation.
• A stipulation should require developers and permitting agencies to have clear instructions about how to identify local entities to engage—including local and Tribal governments, nonprofit entities providing health and social services, housing and land use planning advocates, and neighborhood organizations providing services to affected communities.
• A federal mining impact board should be established to review and approve mine impact plans jointly submitted by community stakeholders and the project developer. The impact board adds specific capacity and expertise to the mine permitting process that can relieve agency bottlenecks and build trust to reduce conflict and delay. To be representative and effective, the board should include federal and state agencies with economic development, community impact, and mining expertise; representatives from local and Tribal communities (e.g., local businesses, landowners, and public officials); industry; and members of affected stakeholder groups, including workforce, conservation, and disadvantaged or underserved communities and Tribal nations.
• The impact planning process must provide funding, training, and technical assistance to local stakeholders to ensure affected communities can participate effectively in the impact planning process.²⁹ The permitting agency should partner with an eligible place-based economic development entity with existing federal partnerships to facilitate the impact plan process and pass through federal capacity-building resources to stakeholders.³⁰ Funding should be paid upfront by project developers and credited against future tax obligations once mining begins.
• The impact plan must be tied to the project, not the developer. Impact plans require a sound governance structure, including dispute resolution and accountability for all parties.

Community benefits agreements

A second key feature of community-oriented mining policy is securing a CBA or equivalent agreement as part of the permitting process for new mining projects. A CBA should be clearly distinguished from impact mitigation. Moreover, it should build capacity, assets, and partnerships that leverage capital investments and resource wealth into more diversified and resilient regional economies and communities. To be successful, federal policy should require CBA process and outcomes that include:

• A CBA process begins with a community development strategy, or wish list, that builds toward a locally defined vision of what a community wants to gain from mining activity. Community engagement to articulate a community development strategy should be facilitated by an existing and trusted third party entity—ideally the same institution involved with the impact plan described above—that can provide resources, training, and expertise to facilitate the process.
• A CBA should be jointly agreed to by the project developer and community stakeholders. The content of a CBA articulates commitments of money, services, and in-kind donations from the mine developer or operator that implement elements of the community development strategy.
• A CBA should be reviewed and approved by the mining impact board.
• A CBA should provide mutual benefits to developers and communities. Mine developers expect to receive a social license from the community to develop and operate a mine, including advancement toward a permit and processes to avoid and mediate disputes. Communities expect to have a voice in the design and operation of the mine and to share in the benefits of mining activity.
• A CBA must be coordinated and leveraged with a portion of royalties set aside in dedicated funds for community development and federal commitments that align federal rural economic development grant and loan resources.
• A CBA should be tied to the project, not the developer. CBAs require a sound governance structure, including dispute resolution and accountability for all parties.

Asset-based revenue management

The Center for American Progress previously proposed an Energy and Resource Legacy Fund to reform the current fossil fuel royalty payment model by replacing uncertain annual disbursements with stable and predictable distributions from a permanent financial asset.³¹ The same model can and should be applied to royalties collected from mining activity on public lands. The proposed Energy and Resource Legacy Fund has several notable features:

• Annual royalty revenue collected when resources are extracted are deposited into a permanent fund. The principal balance of the permanent fund is invested to earn income that is used to make stale and predictable payments back to the state and local governments where mining activity occurs.
• The fund is best established outside the U.S. Department of the Treasury to protect it from future reappropriation—for example, raiding by Congress or the states—and allow for a diversified investment strategy.
• The fund must have a clear fiduciary duty to mining communities, meaning decisions about how the fund is invested and how the proceeds are used must benefit communities affected by mining projects. One way to accomplish this is to establish a federal corporation to manage the fund led by a board with robust representation from beneficiary communities.
• The fund must be financed through a Treasury loan that will be paid back over time, with new royalties collected from mining on federal leases.
• The balance of the fund would be invested to earn income. The way the fund is invested should protect the balance in perpetuity. That means an investment strategy—the types of stocks and bonds invested—has to receive a return that, on average, keeps pace with inflation while payments are made out of the fund. Payments to state and local governments from the fund could be used for any governmental purpose.

The United States and the world are on the precipice of a mining boom stemming from the material needs of the energy transition. Yet U.S. mining policies are outdated and do not ensure that rural communities and regions will have a voice in how mining is conducted or will benefit when mines are developed. And globally, alignment on community engagement and community benefits will ensure consistency and equity of supply chains.

In the short term, mining activity to supply metals and elements needed by a renewable energy system will increase. Over time, extraction activity will decrease substantially as fossil fuels are no longer mined and drilled. And the needs of the renewable energy system will ultimately be time-limited, lasting several decades and then slowing after infrastructure and battery needs are met and recycling and substitution reduce the need for virgin metals. It is essential that new mining does not replicate the harms of historic boom-and-bust extractive economies, leaving communities depleted and abandoned after mining ends.

The framework presented here is to inform ongoing mining reform conversations. Federal policy makers can look to existing state statutes and local initiatives for inspiration. States such as Montana and New Mexico have best practices in place around impact plans and permanent funds. Meanwhile, communities such as Salmon, Idaho, are spearheading local efforts to secure lasting benefits. Pieced together, and with the necessary support and resources to facilitate place-based planning and capacity building, federal policy that builds stronger, more resilient communities is within reach.

The end result of integrated impact planning, community benefits, and asset-based revenue management—a community-oriented mining policy—resolves one of the necessary components for revitalizing a domestic mining economy that meets national energy goals. A full consideration of mining policy must also consider environmental rules, bonding, supply chain investments, foreign trade policy, and more. However, adding overlooked and important community engagement and economic development policy is a must for any legislative and administrative efforts to modernize U.S. mining strategy going forward.

Mark Haggerty is a senior fellow at the Center for American Progress.

Jackson Rose is former executive director of the Meagher County Stewardship Council, formed to negotiate a community impact plan and community benefits agreement with the Black Butte copper mine in Meagher County, Montana. Jackson is an instructor in the Geography department at Montana State University.

Toni Ruth recently stepped down as executive director of Salmon Valley Stewardship but continues to lead negotiations between a cobalt mining company planning to operate a mine on federal land near Salmon, Idaho, and community leaders.