By JOHN PEPIN – Journal Staff Writer (jpepin@miningjournal.net) , The Mining Journal

MARQUETTE – Michigan Department of Natural Resources Director Keith Creagh said that despite current tension and disagreement between state officials and the Marquette County Board on provisions of a proposed severance tax, he’s optimistic the two sides can come to an agreement.

Creagh said he thinks legislation on creating the new tax for non-ferrous mining operations will be introduced next month, with limited calendar days left for the Legislature to act before the close of 2012.

“It is important to get it done by the end of the year, just because Kennecott-Rio Tinto is going to pay property tax this year,” Creagh said. “In a perfect world, we get it done before Dec. 31st and we’d have agreement between the administration, the legislature, the mines and the locals.”

Under the state’s philosophy, a 3 percent severance tax, based on a $3.5 billion valuation of the Kennecott-Rio Tinto Eagle Mine’s seven-year lifespan, would provide 1.5 percent to locals taxing units and 1.5 percent to a rural economic development fund.

Marquette County officials think 1.8 percent is necessary to provide locals with the equivalent of ad valorem tax on the Eagle Mine.

“I’m actually optimistic that we’ll continue to have dialogue and we’ll continue to increase each others comfort just a bit,” Creagh said.

But whether the county and state agree or not, legislation will have to be introduced to create the severance tax and lawmakers will then have their chance to add or take away from its provisions before passage.

“I haven’t known any piece of legislation yet that always passes exactly as it’s introduced,” Creagh said. “That’s part of the process. You’ve got to get 56 votes in the House, 20 in the Senate. That’s how the process works. And so bills are introduced. It’s a platform for discussion. That’s the democratic process. And we’ll work with that and we’ll look forward to them weighing in to make sure that we pay attention to all the parties.”

Creagh said state officials will continue to work on communicating their severance tax proposal philosophy to lawmakers including state Rep. Matt Huuki, R-Atlantic Mine, Rep. Ed McBroom, R-Vulcan and state Sen. Tom Casperson, R-Escanaba and others.

Hukki was working on severance tax proposals late last year. Creagh said the administration started to take more notice in February and decided it was “something we ought to do.” Creagh said Huuki’s most recent draft proposed a 2.3 percent severance tax with a number of deductions.

Creagh said the state’s proposal is “simple, fair and efficient.” It only allows for one deduction -transportation costs, which are capped at 20 percent. Creagh said the administration has not sought out any alternative sponsors for the bill.

Creagh said he appreciates the county board and staff who he said have done a “nice job” working on the severance tax issue. He said the administration will continue to talk with the locals, trying to resolve their differences.

“It is good conversation to have. We should get this right,” Creagh said. “It’s important for the U.P., it’s important for the administration it’s important for the county, it’s important for local townships.”

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