Proposed Coal Rule Sparks Huge Public Outcry

CREDIT: AP Photo/Matthew Brown, File

In this April 2007 file photo, a shovel preparesto dump a load of coal into a 320-ton truck at the Black Thunder Mine in Wright, Wyo.

A seemingly low-profile proposal from a little-known natural resources agency in the Department of the Interior (DOI) has attracted a record-breaking 210,000 public comments from taxpayers, who argue that they are not receiving a fair share of revenues from the mining of coal on U.S. public lands.

The public outcry came in response to a proposed rule from DOI’s Office of Natural Resources Revenue that aims to close a regulatory loophole that allows coal companies to avoid paying royalties owed to taxpayers. Critics argue that the proposed rule does not go far enough to guarantee that western states and U.S. taxpayers are receiving a fair value for the coal mined on America’s public lands, due to additional subsidies given to coal companies under the rule.

“We just got done with this Legislature where there were a lot of needs that couldn’t be met,” said Steve Charter, a rancher from north of Billings, Montana told the Billings Gazette. Meanwhile, he said, “since 2008 Montana has lost over $30 million in coal royalties that should have been revenue to the state.”

In January, a report from the Center for American Progress uncovered evidence that coal companies are dodging royalty payments owed to taxpayers by selling coal to their own subsidiary companies and then paying royalties on artificially low prices.

Reviews of the Department of the Interior’s coal program have also found that coal companies are taking advantage of up to $1 billion a year in royalty rate reductions and subsidies for washing and transporting coal.

According to public opinion research released last week, most Americans oppose providing subsidies to coal companies that mine on public lands. The poll found that, by an almost two-to-one margin, respondents said they would prefer to see the subsidies ended. The research, which was conducted by Hart Research Associates and jointly commissioned by the Center for American Progress and the Mountain PACT, also found that 71 percent of Americans support reforms that would require coal companies to pay a fee to compensate for environmental damage; 69 percent want coal companies to pay royalties on the true value of coal at the price it is sold to a power plant or exporter; and 62 percent want reforms that would increase required royalties overall.

“A strong majority of Americans say the government should be better defending their interests as taxpayers by collecting every dollar of coal royalties that are owed,” Geoffrey Garin, president of Hart Research Associates, said in a statement. “For voters, the top priority for federal coal reform is to ensure that states and local communities are getting their fair share of revenues to fund schools, roads, and other critical needs.”

The record response to the proposed Office of Natural Resources Revenue rule reflects growing opposition to federal coal subsidies on public lands from a wide range of constituencies, including sportsmen and conservation groups, taxpayer organizations, members of Congress, labor unions, and western mayors. Last week, a coalition of mountain towns sent a letter sent to Interior Secretary Sally Jewell, asking that loopholes for coal companies be closed.

“The costs of adapting to a changing climate are rising, but at the same time coal companies are taking advantage of gaping loopholes that allow them to pay less, thus depriving many western states (and taxpayers across the country) their fair share of the revenues from coal leased on federal land” the coalition stated in the letter.

The coal industry disagrees. Comments submitted by Cloud Peak Energy, a coal company based in Gillette, Wyoming, argue that the rule “would likely shut down the potential 100 million tons per year shipped to international customers from the PRB [Powder River Basin]; potentially costing the Federal government $166 million per year in coal royalties.”

However, a recent study by Headwaters Economics found that strengthening the proposed rule would yield an estimated $512 million per year in increased revenues for federal and state governments and have no significant impact on coal production or prices for consumers.

While the official comment period has closed on the proposed rule, the Obama Administration has not announced when it expects to publish the final rule.

Emily Ludwigsen is an intern with the Public Lands Project at the Center for American Progress.