Senator Wyden Seek Answers on Coal Royalty Payments

Oregon Senator Ron Wyden

The leaders of the Senate Energy and Natural Resources Committee, incoming Chairman Ron Wyden (D-Ore.) and Ranking Member Lisa Murkowski (R-Alaska), called for federal regulators to ensure taxpayers receive the full value for coal mined on federal and tribal lands, in a bipartisan letter to the Department of Interior sent today.

Recent press reports raised the possibility that coal companies may be shortchanging state and federal taxpayers by understating the value of coal mined on federal and tribal lands. Articles by Thomson Reuters show that out-of-date regulations may be allowing companies to avoid paying full royalties by using financial arrangements to sell coal to affiliated trading firms at low domestic prices. According to Reuters, the affiliate, which is controlled by the coal company, then sells that coal overseas at a much higher price, which is not always reflected in royalty payments.

“As companies seek to ship more coal overseas, taxpayers must be confident that the Bureau of Land Management and the Office of Natural Resources Revenue have stringent royalty collection and auditing controls in place as coal markets become increasingly oriented toward international buyers,” the senators wrote.

Wyden and Murkowski are seeking more information from the Department of Interior, to protect taxpayers against the potential loss of tens of millions of dollars in annual royalty revenue.

“This is so obvious it shouldn’t need to be said: Coal companies need to be paying taxpayers all of the money they are owed.” Wyden said. “Federal agencies have a duty to ensure state and federal taxpayers get the full value for natural resources extracted from public lands. If regulators, or decades-old laws, are not doing enough to protect the public interest, our committee intends to find out, and to fix it.”

“Energy exports can create jobs, generate revenue, and improve our balance of trade. As we seek to maximize these benefits, we must be certain that coal exporters are following the rules for royalty payments so that taxpayers receive a fair return,” Murkowski said. “I am glad that the Interior Department is looking into this issue – to determine if companies are in compliance or not – and I hope that it will be resolved quickly.”

Between the 2001 and 2011 fiscal years, coal royalty revenue for the federal government and Indian tribes has more than doubled to $898 million, according to ONRR. It accounts for 21% of federal onshore royalty payments, 13% of tribal royalty payments and 8% of total federal royalty collections.

The domestic price of coal mined in the Powder River Basin is roughly $13 per ton, according to press reports, which is less than half of international prices that are $30 a ton or more. That price difference would translate to a royalty shortfall to the federal government of more than $2 per ton.

The text of the letter is included below. The letter and a fact sheet on coal royalties are attached.

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