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Coal exports raise questions about royalties

| Saturday, Jan. 5, 2013, 7:02 p.m.
REUTERS
Coal mined from the Powder River Basin in Wyoming is increasingly being shipped to Asia as the nation's coal exports are at record levels. REUTERS

BILLINGS, Mont. — Lawmakers asked the Department of Interior on Friday to review whether companies are shortchanging federal and state governments out of millions of dollars in royalties on coal exported to foreign markets.

The request from Oregon Sen. Ron Wyden and Alaska Sen. Lisa Murkowski was made as coal exports hit record levels last year — an estimated 124 million tons, according to projections from the Department of Energy.

That includes increasing quantities of steam coal used in power plants, which is being shipped to Asia from the Powder River Basin of Montana and Wyoming by companies including Arch Coal Inc., Peabody Energy Corp. and Cloud Peak Energy Inc.

The senators want to know whether companies violated federal leasing law by paying royalties based on the coal's mine price, then selling it overseas at a higher price through affiliated brokers.

Interior officials said last week they are looking into the issue. Montana Gov. Brian Schweitzer said he has seen no evidence that companies are dodging what they owe.

“If somebody's pulling some shenanigans, we want to get to the bottom of it, but I don't think they are,” the Democratic governor said Friday in an interview with The Associated Press. “I haven't seen any evidence that they are shortchanging us at all.”

Wyden is the incoming Democratic chairman of the Senate Energy and Natural Resources Committee, and Murkowski is the panel's ranking Republican. They said the rise in export volumes makes it crucial that proper royalties are collected on coal mined from federal land.

“Taxpayers must be confident that (the Interior Department has) stringent royalty collection and auditing controls in place as coal markets become increasingly oriented toward international buyers,” they wrote in a letter to Interior Secretary Ken Salazar. “If the department's regulations are inadequate to ensure that full royalty value is returned, those regulations must be reformed.”

The senators asked Salazar to respond by Feb. 4.

Representatives of Peabody and Cloud Peak said the companies were fully compliant with federal royalty rules. A spokeswoman for Arch declined comment.

Powder River Basin coal is sold domestically for about $10 a ton. That compares with prices in countries such as Japan that can top $100 per ton.

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