Mining: A royal(ty) mess

By Jodi Peterson

High Country News

If a U.S. company sells coal overseas, should it pay royalties based on the price of that coal if it was sold domestically, or on the actual price it is sold for overseas?

Mining companies have been paying royalties based on the first price, that of domestically sold coal. That’s never been much of an issue, since most coal mined in the U.S. has historically been sold in the country. But the price of coal in the U.S. has plummeted this year due to abundant natural gas supplies and other factors. The value of coal from Wyoming’s Powder River Basin fell nearly 20 percent in 2012, to around $13 per ton.

So a lot of the fuel is being shipped to China and India, where it fetches about 10 times as much per ton (see our coverage Coal-export schemes ignite unusual opposition, from Wyoming to India and The Global West: how foreign investment fuels resource extraction in western states). The companies sell coal destined for overseas markets to  agents affiliated with the companies. These brokers add in transportation costs and jack up the price.  Politicians and industry watchers say that system means that the federal government is getting far lower royalties than it ought to (companies pay a 12.5 percent royalty on the value of coal taken from public lands).


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