Associated Press Wire

Jun 30, 4:38 PM EDT

Obama admin changing coal royalty program to boost revenue


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AP Photo/Manuel Balce Ceneta

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WASHINGTON (AP) -- The Interior Department said Thursday it is changing the way it values coal mined from public lands in the West to make sure mining companies are not shortchanging taxpayers on sales to Asia and other markets.

A final rule issued Thursday comes after coal exports surged in recent years amid a weak U.S. market.

Interior Secretary Sally Jewell said the updated rule will ensure that taxpayers receive "every dollar due" from coal leases on federal lands, a billion-dollar-a-year program that accounts for more than 40 percent of U.S. coal production.

"These improvements were long overdue and urgently needed to better align our regulatory framework with a 21st century energy marketplace," Jewell said.'

Under rules in place since the 1980s, companies can sell the fuel to affiliates and pay royalties to the government on that price, then turn around and sell the coal at higher prices, often overseas.

Under a rule set to take effect Jan. 1, the royalty rate will be determined at the time the coal is leased, and revenue will be based on the price paid by an outside entity, rather than an interim sale to an affiliated company.

Lawmakers and watchdog groups have complained for years that taxpayers were losing hundreds of millions of dollars annually because royalties are improperly calculated.

The change in the way royalties are calculated comes as the Obama administration has launched a wide-ranging review of the federal coal-leasing program, including a three-year halt on new coal leases on federal lands. Officials also are determining if longstanding royalty rates charged to mining companies are too low and reviewing how coal production on federal land contributes to climate change.

Critics say the lease moratorium and other changes are part of a broader effort to dismantle the coal industry at the expense of thousands of mining jobs in Wyoming, Montana, Colorado, Utah and other states with large, public coal reserves.

The National Mining Association said the Obama administration is collaborating with "extreme environmental interests" as it works "overtime to advance more job-crushing and market-distorting policies."

Coal is the largest source of electricity generation in the United States, and coal mined from federal lands accounts for about 44 percent of that total. Production of about 450 million tons a year brings in more than $1 billion in annual revenue, a figure watchdog groups say is artificially low due to a notoriously uncompetitive bidding process.

A Government Accountability Office study found that almost 90 percent of the 107 coal tracts leased since 1990 received just a single bid.

A White House report last week said a sharp increase in royalties paid by companies extracting U.S.-owned coal would trigger only modest mining reductions. The report from the White House Council of Economic Advisers said that doubling the royalty rate on each ton of coal extracted would reduce mining from federal lands by just 7 percent, while bringing in as much as $730 million a year in new revenue.

Coal miners and their supporters have lined up at meetings in Montana, Wyoming and other states to protest the moratorium. They say it would be a major blow to an industry already reeling from widespread bankruptcies, pollution regulations and competition from other fuels such as natural gas.

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