A new report released yesterday sheds light on the hidden costs of coal production, which the Department of the Interior (DOI) should take into account if it wants to modernize the federal coal program and earn “fair market value” for taxpayers, as required by law. Illuminating the Hidden Costs of Coal: How the Interior Department Can Use Economic Tools to Modernize the Federal Coal Program was prepared by the New York University Institute for Policy Integrity. It includes the first-ever calculation of how the social and environmental costs of coal production could be incorporated into federal leasing terms.
Billions of tons of public coal managed by DOI have been sold under a loophole for pennies per ton over the past three decades, and a growing chorus of interests are calling for reform. The NYU report provides detailed economic analysis of the costs that need to be taken into account when leasing the public’s coal.
Recommendations include:
- Increase royalty rates to account for the environmental costs of coal production which are imposed on the public.
- Consider increasing coal royalty rates even higher to account for transportation externalities, such as long rail hauls from the Powder River Basin to ports on the Pacific Coast.
- Revise royalty rate reduction and transportation allowance regulations to provide better incentives for coal companies to eliminate inefficient and market distorting subsidies.
- Increase minimum bids to account for inflation, fixed external costs and to overcome persistent problems with the historically uncompetitive leasing practices.
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