Coal export royalties paid on public lands to be examined

February 12, 2013

U.S. Interior Secretary told Congress that the Office of the Inspector General at his agency opened an investigation of any potential violation of royalty regulations by mining companies exporting coal to Asia.

Under the royalty rules, companies engaged in mining operations in the U.S. pay royalty fees based on the price of the mine; federal and state treasuries get 50 percent of the total collection, each.

A report by Thompson Reuters said that taxpayers might be missing out on millions of dollars in royalties from coal mined on federal and tribal lands. The report noted that, ““By valuing coal at low domestic prices rather than the much higher price fetched overseas, coal producers can dodge the larger royalty payment when mining federal land.”

“The practice stands to pad the bottom line for the mining sector if Asian exports surge in the coming years as the industry hopes, A Reuters investigation has found.”

“Current and former regulators say their supervisory work has lagged the mining industry as it eyes markets across the Pacific. They say they will now give the royalty question a close look,” said the report.

Lisa Murkowski (R, AK) and Ron Wyden (D, OR) initiated the probe following the story.

In a letter to the Senate Energy and Natural Resources Committee, Salazar said the Department of Interior has developed an action plan and convened a task force — “with a focus on sales to overseas markets — to ensure that coal companies are properly reporting and paying royalties.”

“These actions demonstrate the benefits of conducting oversight,” Wyden and Murkowski said in a joint statement. “We are particularly pleased with the formation of a task force to ensure coal to ensure coal companies have paid their fair share when coal is mined on public lands and sold overseas.”
The task force will undertake a two-step review of sales summaries and contracts between 2009 and 2011. “This is faster than the agency’s typical audit cycle that reviews sales three years after they have taken place,” said the senators.

The second step of the review will include, on a risk-based approach, non-audited or reviewed mines and leases between 2001 and 2008. Both reviews will initially focus on the Powder River Basin in Wyoming and Montana, before expanding to other states such as Utah and Colorado.
 

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