Taxpayers are not getting enough support from US government on coal exports

February 6, 2014

A new report from the Government Accountability Office (GAO) concluded that the U.S. federal government is doing enough to protect the interests of taxpayers when it comes to the millions of tons of coal being mined from federal land and exported abroad.

The report states that the Interior Department doles out leases and collects royalties from companies mining on federal lands in regions such as the Powder River Basin in eastern Montana and Wyoming. Most of that coal is used domestically, however, the report found thatgovernment officials have largely ignored the increasing amount of coal that is exported, and taxpayers could be losing out as a result, Reuters reported.
Coal exports are generally sold at higher prices than coal sold domestically.

“The Bureau of Land Management (BLM) considers exports to a limited extent,” the GAO, the investigative arm of Congress, said of the BLM, which is agency that is responsible for getting the best deal possible for taxpayers on coal sales.

Wyoming officials have only considered the value of export markets with “generic boilerplate statements about the possibility of coal exports,” the report stated.

Officials from Colorado and other states told the GAO, “they did not consider exports when estimating fair market value because there were few or no coal exports.”

More than 5.4 Mt (6 million st) of coal were exported from Colorado mines in 2012, according to data from the Energy Information Administration, and about half of that was sold by brokers and traders.

All of the 8.2 Mt (9 million st) of coal exported from Montana that year was sold through a trading desk, Reuters reported.

Early last year, former Interior Department Secretary Ken Salazar ordered an investigation into whether miners were wrongly using affiliated brokers to skirt royalty payments.

U.S. taxpayers are due a 12.5 percent royalty on coal sales from federal land, but officials want to know whether miners are clearing their sales at artificially low prices.

The Interior Department said that it is committed to protecting taxpayers, but declined to comment on its investigation into possible royalty shortfalls on coal exports.

Taxpayers have a stake in coal mined from federal land even before the fuel is sold.

Interior officials organize auctions of tracts and are supposed to seek a "fair market value," but the standards for those sales are often irregular, the GAO said.

Officials were found to "not consistently document the rationale for accepting bids that were initially below fair market value," the report stated.

When using comparable sales prices to find a benchmark value, the report says, Interior has used past sales that were five years old when the market was different.


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Coal     Exports