Asia Coal Export Boom Brings No Bonus for US Taxpayers
From NBC News
By Patrick Rucker
U.S. miners who are booking big profits on coal sales to Asia are enjoying an accounting windfall to boot.
By valuing coal at low domestic prices rather than the much higher price fetched overseas, coal producers can dodge the larger royalty payout when mining federal land.
The practice stands to pad the bottom line for the mining sector if Asian exports surge in coming years as the industry hopes, a Reuters investigation has found.
Current and former regulators say their supervisory work has lagged the mining industry as it eyed markets across the Pacific. They say they will now give the royalty question a close look.
“We are committed to collecting every dollar due,” said Patrick Etchart, spokesman for the Office of Natural Resources Revenue, which collects federal royalties.
At issue is the black rock pulled from the coal-rich Powder River Basin in Wyoming and Montana. Miners there say they abide by the letter of royalty rules that call for the government to get a 12.5 percent cut on coal sold under federal lease.
The question is: At what point is that coal valued?
Most Powder River Basin coal is sold domestically, where prices have been depressed by a glut of natural gas and regulations meant to curb pollution.
But Asian economies rely on coal to sustain growth, so the ton worth about $13 near the Powder River Basin mines last year fetched roughly 10 times that in China.
After deducting costs like shipping by sea and rail, that ton of Powder River Basin coal sold in China last year would have returned about $30 to the miners, several industry analysts estimate.
Luther Lu, director at China-based Fenwei Energy Consulting, said the figure was closer to half that, with miners up against other costs that would have cut into their margin.
Whatever the take-home for miners, several royalty experts said, the taxpayer is due a share of the final sale price overseas.
Powder River Basin mining companies disagree and say that they are right to pay out royalties at the low domestic prices.
“If you look at the regulations, we are not required to do a net-back,” said Karla Kimrey, a spokeswoman for Cloud Peak Energy, referring to the return on Asian sales. The taxpayers’ bite would be based on that number.
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