Coal companies that mine on federal lands have been exploiting loopholes that serve to make their coal inexpensive for years, a practice which is impacting the economy of Appalachia and should be stopped, according to a new report.
The report, published Monday by the Center for American Progress, states that decades-old flaws in the federal government’s program for leasing coal on public lands are giving coal companies that mine in Western states an unfair advantage over companies that mine in Appalachia. That’s because 40 percent of U.S. coal is mined from federal lands, and much of that land is out West — nearly all the coal that comes from Wyoming and Montana’s Powder River Basin is mined on federal lands, while only about one-tenth of 1 percent of Appalachian coal is mined from federal lands.
Right now, the minimum royalty rate for coal mined on federal lands is 12.5 percent — a rate that’s lower than the royalty rate collected for offshore oil and gas leases and one that’s same as it was in 1976. In addition, the report states, coal companies have been able to manipulate the system to pay the royalty on a decreased coal price. The rate needs to change, the report argues, and the new revenue generated by the increase in rate should be put toward job transition and economic diversification efforts in Appalachia. A more comprehensive approach would also include changing the system so that coal companies can’t pay the rate on a below-market coal price, the report states.
Changing the royalty rate “would bring transparency and fairness to the industry while raising additional revenues,” Rep. Matt Cartwright (D-PA) said on a press call Monday. Cartwright said he would be introducing legislation in the coming months that would “eliminate the loopholes that are allowing private coal companies to game the system.”
The economic advantage Western coal producers have is exacerbating economic struggles in Appalachia, a region that’s been losing coal jobs for decades. In addition to competition from cheaper, Western coal, that decline in coal jobs can be attributed to the mechanization of coal extraction in the region, which means that fewer workers are needed to mine for coal. Appalachian coal — along with coal from the rest of the country — is also struggling to compete with natural gas.
Ted Strickland, Counselor to the Center for American Progress, said on the call Monday that he doesn’t think the proposal will affect how much coal is used by the U.S., though it may end up affecting where in the country that coal comes from.
“I think it ought to be seen as a fair competition plan and a fair market plan,” he said. “The market will make the decisions once this imbalance is affected. All we’re asking for is that these Appalachian communities not be penalized as a result of unfair government policy.”
The proposal notes that there are multiple initiatives out there already that aim to improve Appalachia’s economic standing. Kentucky, for instance, has the SOAR initiative, which was launched in 2013 by Kentucky Gov. Steve Beshear (D) and Rep. Hal Rogers (R) and aims to diversify the state’s economy. Just a few months ago, West Virginia announced a similar initiative, called SCORE — Southern Coalfields Organizing and Revitalizing the Economy — which is focusing on the state’s tourism industry and aims to find ways to re-purpose land that once was used for mining.
The report isn’t the first to call for a renewed look at the country’s rules for coal mining on federal land. Last November, Microsoft Corp. co-founder Paul Allen sued the federal government over its coal-leasing program, claiming that the Bureau of Land Management’s fees don’t pay account for the harm coal inflicts on the environment.
“The leasing of coal from federal lands undermines President Obama’s climate policy goals,” Allen wrote in November. “We have no comprehensive understanding of the air pollution and climate impact of the federal coal-leasing program because the Bureau of Land Management has failed to analyze the available data for more than three decades.”