The Race for Coal
|Zack Colman||February 8th 2013|
The Interior Department will investigate whether mining companies are gaming the federal government by skirting royalty payments, a pair of senior senators announced Friday. The agency is looking into whether mining firms lowball the value of coal excavated from federal lands to minimize the fees they pay the government.
“The Department shares your concern that this matter should be taken seriously and be thoroughly investigated to determine if there is any merit to the allegations contained in the December 4, 2012, Reuters articles referenced in your letter,” Interior Secretary Ken Salazar wrote in a letter Thursday to Senate Energy and Natural Resources Committee Chairman Ron Wyden (D-Ore.). Reuters said mining companies are underreporting the price of coal at mine sites — where royalties are assessed — then selling it to marketers that they oftentimes own. Reuters said those intermediaries then ship the coal abroad, where they fetch higher prices.
Wyden and Energy Committee ranking member Sen. Lisa Murkowski (R-Alaska) had asked Salazar to examine those charges in a January letter. They said the government could ill afford to lose out on any revenues, noting coal royalties amounted to $898 million in 2011.
The senators, who pledged continued oversight on the matter, praised the Interior Department's announcement on Friday. “We are particularly pleased with the formation of a task force to ensure coal companies have paid their fair share when coal is mined on public lands and sold overseas,” they said in a joint statement.
The National Mining Association, an industry trade group, has questioned the accuracy of the Reuters report. In his letter, Salazar said the allegations in the Reuters story highlight the need to update coal royalty rules.
The Interior Department floated proposed changes to calculating royalties in May 2011. Rather than collecting fees on the value of the coal at the mine, the department is considering levying royalties on the gross proceeds of transactions.
“The issues surrounding Federal coal export sales underscore why royalty valuation reform is necessary and presents an opportunity for the Department to pursue broader royalty reforms,” Salazar wrote, adding, “The proposed changes could dramatically improve compliance and reduce administrative costs for industry and the Government.”
As part of the probe, the department will expedite reviews of coal-mining contracts and transactions from between 2009 and 2011 from the Powder River Basin. That region, located in Montana and Wyoming, is the source of most of the coal exported to Asia.
The Interior Department will then audit older sales — from 2001 through 2008 — from the Powder River Basin, along with states such as Utah and Colorado. Concurrently, the department’s inspector general will search for any regulatory or legal violations — such as alleged coal devaluation — by mining and marketing entities.
Zack Colman writes for The Hill, from where this article is adapted.