The American public lost out on $850 million dollars in potential coal royalty revenue between 2008 and 2012, according to a new study from Headwaters Economics.
The study says the federal coal royalty system is in need of reform. The group's analysis shows that coal companies pay a much lower royalty rate on public lands than other extractive industries -- roughly five percent of market price. By comparison, oil and gas companies pay roughly 12 percent. Mark Haggerty says that's partly because of the complex marketing system for coal.
“There’s also some quirks in the coal market that allow miners to sell coal at the lease or near the lease to brokers who can then re-market that coal for a higher price to end consumers,” Haggerty says.
Brokers profit by buying coal at the mine mouth and reselling it to end users. Mark Haggerty says there didn't used to be as many brokers, and that federal policy hasn't caught up with changes in the coal industry.
“The loophole has always been there,” Haggerty says, “but it’s maybe increasing in its importance in terms of the loss of royalty revenue, or the lower costs to industry, might be relatively new thing, but it actually is not reflective of a change in federal policy.”
The State of Wyoming receives half of the coal royalties collected by the federal government.
National policymakers recently announced potential reforms to coal royalties, which would change how broker sales are factored in. The comment period ends March 9.