The Department of the Interior closed the coal royalty loophole in late June after years of study and public comments. On June 30, the agency issued a new rule to calculate royalties for federal coal and other minerals. Companies pay royalties based on the sale price of coal. Many companies first sell coal to affiliated companies at a low price. These firms then re-sell the coal to unaffiliated companies at a higher price. The new rule bases the royalty on the sale to an unaffiliated company.
Bob LeResche, chair of the Powder River Basin Resource Council and WORC Board member, said:
“This loophole has allowed coal companies to effectively avoid paying royalties to the government by selling coal to themselves at a reduced rate, and has cost state and federal taxpayers roughly $850 million between 2008 and 2012. Reforms to require companies to calculate royalties based on true arm’s-length transactions are long overdue.”
WORC has been urging reform of the coal royalty rule since 2011. In December 2012, Patrick Rucker, reporting for Reuters, broke the story of how coal companies were gaming the system by selling coal bound for export in two separate transactions, first to their subsidiaries, and then reselling across the Pacific for much higher prices. Subsequently, a coal royalty draft rule was published in January 2015, garnering over 200,000 public comments in overwhelming support of reform. The new rule will also ensure greater returns to tribal mineral owners.
Companies built network
Quoted below is list from an issue brief by the Center for American Progress of the extensive network of subsidiaries and affiliated developed by the biggest coal companies in the Powder River Basin of Montana and Wyoming.
- Alpha Natural Resources, operator of the Belle Ayr and Eagle Butte mines in Wyoming, has built a network of 184 domestic and foreign subsidiaries.
- Ambre Energy, which operates the Decker Mine in Montana that has produced more than 300 million tons of coal, has built a network of 26 domestic and foreign subsidiaries.
- Arch Coal—which controls more than 3.3 billion tons of coal reserves in the PRB and operates the Black Thunder Mine, one of the globe’s largest coal mines and the first in the world to ship 1 billion tons of coal—has built a network of 83 domestic and foreign subsidiaries.
- Cloud Peak Energy, which operates the Antelope, Spring Creek, and Cordero Rojo mines in the PRB that produced more than 86 million tons of coal in 2013 alone, has built a network of at least 31 domestic subsidiaries.
- Peabody Energy—which operates the North Antelope Rochelle Mine in Wyoming, the largest coal mine in the United States—has built a network of 141 domestic subsidiaries and 101 foreign subsidiaries.
More on new coal royalty rule
The Interior Department statement and a link to the rule can be found here.
Read more coal stories here.
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