What are these rules about?
This rule is about nonferrous state mineral leases for minerals managed by the State of Minnesota. If you are not interested in the royalty payment structure in nonferrous state mineral lease rules, you can disregard this rulemaking notice.
What will this rulemaking do?
The Department of Natural Resources is considering a rule amendment that would modify the formula and methodology used to adjust for inflation for nonferrous royalty rates.
The nonferrous royalty rates are established by rule. The rule (Minn. Rules, part 6125.0700) provides a formula and methodology to adjust for inflation, but it is flawed and needs to be modified. The proposed modification would not alter the royalty rates in rule, but rather would make changes to properly adjust for inflation.
Who might be affected by these rule changes?
The amendment to the rules would most directly affect the following groups and individuals:
- Exploration and mining companies wishing to mine state-managed nonferrous minerals in Minnesota.
- Communities in the vicinity of state-managed nonferrous minerals.
- Beneficiaries of state royalties, which include counties, local schools, towns, public universities, and K-12 public education throughout the state.
Where do I send my comments?
Send written comments, questions, and requests for more information on these possible rules to the DNR contact person listed below by October 23, 2024. This public comment opportunity is associated with the development of possible rules. There will be another public comment opportunity when the DNR announces a formal notice of intent to adopt rules.
Information submitted as a public comment is public data, including any contact information you include with your written comments.
What is the current status?
The DNR recently became aware of an issue in the current inflation adjustment method. The magnitude of this issue will continue to grow as long as inflation continues to rise. However, since nonferrous mining has not occurred in state minerals, this inflation adjustment problem has not had an impact on actual royalty payments to date.
The rules for nonferrous mineral royalties were last amended in 1995. The current rules use a precise royalty rate lookup chart, which varies the royalty rate from a minimum of 3.95% of net return value ($) per ton to a maximum royalty rate of 20% of net return value ($) per ton. Net return value is the value of certain products (e.g., concentrate or refined metals) made with state minerals and sold by the company, minus any allowable charges such as refining costs, as defined in the lease. The royalty rates in the lookup chart escalate from 3.95% to 20%, in a progressive curve based on a quadratic equation, that considers factors like mineral concentrations and market value. The proposed rule would not change the curve, the quadratic equation or the values within the lookup chart. Rather it would address language in the 1995 rule that adjusts only the first $75 per ton of the net return value for inflation. The proposed rule language would fully adjust the total net return value for inflation. This would be done by modifying a step in the calculation process to use the full net return value when adjusting for inflation to determine which cell in the lookup table is applicable.
With this rule change, the net return value would be fully adjusted for inflation. The new formula would correct royalty rates that would be higher, and sometimes much higher, if calculated under the current, flawed formula. Continued inflation increases over time will exacerbate this issue if left uncorrected.
Where can I get more information?
Rulemaking documents
- Request for comments
If you want a free copy of the proposed rules, call or email the DNR contact person listed below.
How can I sign up for rulemaking notices?
To receive DNR rulemaking notices on all topics, subscribe to the DNR rules notification lists.
DNR contact
Irina Woldeab
Principal Planner – Lands and Minerals Division
Minnesota Department of Natural Resources
500 Lafayette Rd St. Paul MN 55155
[email protected]