Feds Change Coal Royalty Rules To Close Loophole

Jul 1, 2016

A shovel removes overburden at Cloud Peak Energy's Antelope mine.
Credit Stephanie Joyce / Wyoming Public Radio

New rules from the Department of the Interior aim to close what many have called a loophole in how federal coal resources are valued.

Most of the coal mined in Wyoming is owned by the federal government. Companies pay royalties for the right to mine that coal—in theory, 12.5 percent of the sale price.

But determining that sale price is complicated by the fact that coal is often first sold to companies wholly or partially owned by the coal miner, and then re-sold to unaffiliated companies. Critics say the government’s current method of valuing those sales allows companies to avoid tens of millions of dollars in royalty payments. 

Among other things, the new rules change the way the sale price is calculated, so that it is based off the first sale to an unaffiliated company.

Industry groups immediately criticized the new rules, saying they will discourage new coal development on federal lands. In a statement, Cloud Peak Energy, one of the nation’s largest coal producers, called the change arbitrary and capricious, and said it is evaluating its legal options.

"This unlawful rule is entirely in keeping with the Soviet style show trials that the Secretary of Interior has been running with regards to the federal coal leasing program, in which the verdict has been decided, the sentence decreed, and evidence to the contrary is to be ignored," wrote Cloud Peak spokesman Rick Curtsinger. 

But environmental and public advocacy groups praised the new rules, saying they were long overdue.

"If their business depends on cheating the government, then they ought to find another business," said Bob LeResche, chair of the Powder River Basin Resource Council.

The rules were last updated in the 1980s.