US to consider sharp hike in royalties on coal

Royalty rates on coal extracted from massive strip mines on public lands could increase 50 percent under a pending overhaul of a U.S. government program that critics say contributes to climate change, documents released Thursday show.

The royalty hike was contained in an Interior Department notice providing the first outlines of a planned three-year evaluation of the government’s sale of coal from public lands, primarily in the West.

Lower royalty rates to stimulate mining also will be considered.

The Obama administration in January imposed a moratorium on new coal leases to address the costs of climate change from burning coal and ensure a fair financial return to taxpayers.

Interior spokeswoman Jessica Kershaw says Thursday’s notice sets “sideboards” for that review.

“This isn’t a hard and fast determination on the actual royalty rate increase or decrease at this point,” Kershaw said in an emailed response to questions from The Associated Press.

The royalty increase from 12.5 percent to 18.75 percent would apply to coal from strip mines. That would be comparable to royalties on offshore oil and gas leases, the Interior Department said. Underground mines pay an eight percent royalty.

The Powder River Basin of Wyoming and Montana is home to many of the largest mines and has emerged as the focal point of the debate over U.S. coal mining.

A mining industry representative said a royalty increase could dampen coal production and ultimately reduce revenue. Companies with mines on federal lands “already are paying their fair share,” said Emma Gross with the National Mining Association.

But coal’s detractors counter that the industry has benefited from billions of dollars in federal subsidies, artificially propping up an industry that has seen its share of the electricity-generation market plummet as cheap natural gas provides new competition.

A recent report from the environmental group Greenpeace found numerous instances of companies buying multi-million ton coal leases on federal lands and then mining more fuel than what they paid for. The report was based on data released by the Interior Department in response to public records requests.

More than 40 percent of U.S. coal production — roughly 450 million tons a year — comes from public lands in Wyoming, Montana and other Western states. Over the past decade, companies mined about 4.3 billion tons from public lands, yielding about $9.5 billion in royalties, taxes and other revenue, according to the Interior Department.

Royalty rates have remain unchanged since 1976 and nearly 90 percent of coal tracts leased by the agency receive just a single bid.

The lack of competition and other problems in the program have cost the government as much as $200 million a year in lost revenue, according to a 2014 report by the Government Accountability Office.