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Marquette County Board hires firm to look at mine tax issues

September 5, 2012
By JOHN PEPIN - Journal Staff Writer ( , The Mining Journal

MARQUETTE - The Marquette County Board voted Tuesday to hire an independent firm to analyze differences in opinion between the county, Rio Tinto (Kennecott) and state government on tax evaluation and revenue figures, which factor prominently into the creation of a proposed severance tax on non-ferrous mining operations.

The county recently asked state officials to arrange a meeting of the parties involved to work out remaining differences on proposed provisions of the severance tax, which would replace revenue currently generated for local entities under ad valorem property tax.

"The county, Rio Tinto and the state all predict different revenue coming in under the current system and the proposed new system," said Valerie Brader, deputy legal counsel and senior policy advisor for Gov. Rick Snyder, in a letter to the county. "While we are generally happy to participate in a meeting of the parties, until that fundamental issue is closer to resolution, we are concerned that such a meeting would not be productive.

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"However, if a third-party opinion regarding those revenue estimates were made available prior to such a meeting, we expect that such a meeting would be extremely productive."

Brader suggested Rio Tinto pay for such an evaluation, made by a third-party expert selected by the county, assuming Rio Tinto had no objection to the selection due to lack of objectivity.

The mining company recently made that offer to the county. Tuesday's vote by the board would approve the hiring of a firm, but no specific firm has been selected. The county has received one proposal and will consider others.

A crucial factor in the issue is whether information previously deemed proprietary by Rio Tinto will be made available to the firm to makes its findings. Without that, board members said they wouldn't expect an accurate evaluation of the issues, which include disputing the valuation of the Eagle Mine set at $191 million in February and whether Proposal A caps affect the severance tax.

"This idea of hiring an outside firm to look at this $191 (million valuation) came from Kennecott (Rio Tinto) and also the state has now said, 'We think that's a good idea, we think we should do that,'" county board Chairwoman Deborah Pellow said. "So, if they're not going to release the information, then what good is it for us to even hire these people to do this? So we can more or less throw it back and them and say, 'This was your idea, so in order to get it done, you've got to release the information.'"

To maintain independence between the firm and Rio Tinto, the county plans to hire the firm, pay for the evaluation and then later be reimbursed for the cost by the mining company. The county approved a cost of no more than $15,000. That figure had not been approved by Rio Tinto as of Tuesday.

The board's motion passed on a vote of 7-1 with Commissioner Nick Joseph dissenting and Commissioner Bill Nordeen absent.

"If you really want an impartial view, the person who pays the bill usually gets that service and if Kennecott's going to pay the bill for us, the loyalty could go to them rather than this county board," Joseph said.

Commissioner Bruce Heikkila said, "If we hire them, they owe us the loyalty, not Kennecott or anybody else. So that's why I think it would be important that we hire them as a board."

Pellow said she expects firm candidates to be finalized - and the unanswered questions for Rio Tinto likely answered - by the panel's meeting next Tuesday.

John Pepin can be reached at 906-228-2500, ext. 206.



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