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Senators question payments on coal

They want to ensure companies paying full amount

BILLINGS – Lawmakers asked the U.S. 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 comes as U.S. 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 if 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 Friday 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. “I haven’t seen any evidence that they are shortchanging us at all.”

Wyden, a Democrat, is the incoming chairman of the Senate Energy and Natural Resources Committee; 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.

The concerns over royalties on coal exports were first reported by Reuters.

A spokesman for Wyoming Gov. Matt Mead, a Republican, said state officials there also had seen no evidence that companies had failed to pay the proper royalties.

Nevertheless, officials from Wyoming, Montana and the federal government are auditing coal sales made over the last several years to make sure companies complied with royalty rules. Those audits could take a year or longer to complete, according to Interior Department officials.

“We will pursue this and make sure they are paying the proper royalties,” said Patrick Etchart, a spokesman for Interior’s Office of Natural Resources Revenue.

More than 460 million tons of coal was mined from federal lands last year, primarily in the Powder River Basin and in other western states. The federal government collected $875 million in royalties in 2012 on coal sales of more than $8.1 billion. About half of federal royalties are returned to states.

Exports from western states totaled almost 22 million tons in 2011, the most recent figure available. That compares with a little more than 6 million tons exported from western states in 2009.