Leaders of the Senate Energy and Natural Resources Committee on Friday called on the Department of the Interior to investigate whether coal companies are understating the value of coal mined on federal and tribal lands to avoid paying full royalties.

The committee’s new chairman, Sen. Ron Wyden (D-Ore.), and ranking member Sen. Lisa Murkowski (R-Ala.) in a bipartisan letter cited a Dec. 4 Reuters report that alleged coal producers are valuing coal mined at low domestic prices, selling that coal to affiliated trading firms at those prices to avoid paying royalties, and then selling the coal overseas at a much higher price, which is not always reflected in royalty payments.

“As companies seek to ship more coal overseas, taxpayers must be confident that the Bureau of Land Management and the Office of Natural Resources Revenue have stringent royalty collection and auditing controls in place as coal markets become increasingly oriented toward international buyers,” the senators wrote.

"In addition to our own concerns, as members of Congress, others have weighed in—on a bipartisan basis—including the administrations of both Montana Governor Brian Schweitzer and Wyoming Governor Matt Mead. In a recent interview, Governor Schweitzer said that ‘we need to collect on the actual value’ of coal exported overseas," the letter says.

According to a fact sheet provided by Sen. Wyden, the domestic price of coal mined in the Powder River Basin is roughly $13 per ton—less than half of international prices that are $30 a ton or more. That price difference would translate into a royalty shortfall to the federal government of more than $2 per ton.

Between the 2001 and 2011 fiscal years, coal royalty revenue for the federal government and Indian tribes has more than doubled to $898 million, according to the Office of Natural Resources Revenue. That accounts for 21% of federal onshore royalty payments, 13% of tribal royalty payments, and 8% of total federal royalty collections.

“This is so obvious it shouldn’t need to be said: Coal companies need to be paying taxpayers all of the money they are owed.” Wyden said. “Federal agencies have a duty to ensure state and federal taxpayers get the full value for natural resources extracted from public lands. If regulators, or decades-old laws, are not doing enough to protect the public interest, our committee intends to find out, and to fix it.”

Sources: POWERnews, Sen. Wyden

—Sonal Patel, Senior Writer (@POWERmagazine)