Statement to BLM on Federal Coal Program

Article,  | Quick Take
Jul 29, 2015  | 4 min read | Print Article

Taxpayers for Common Sense President Ryan Alexander spoke today at the first in a series of listening sessions being held by the Bureau of Land Management (BLM) to gather input from the public about how it can ensure American taxpayers receive a fair return on federal coal. Below is the text of her comments before Secretary Jewell, BLM Director Niel Kornzie, and other Department of the Interior Officials.

My name is Ryan Alexander and I am the President of Taxpayers for Common Sense.  Taxpayers for Common Sense is an independent, non-partisan budget watchdog.   Our mission is to achieve a responsible federal government that operates within its means.  Ensuring a fair return for taxpayer-owned assets has been one of our guiding principles since we were founded 20 years ago.

We welcome the decision by the Bureau of Land Management to consider reforms to the federal coal program.

BLM has a fiduciary responsibility to manage our natural resources for long-term value and to ensure a fair return for any development of taxpayer assets, including coal.

Revenues from the collection of royalties represent one of the largest non-tax income sources for the federal government.

Giving away public assets for below fair market value functions as a market-distorting subsidy and a waste of taxpayer resources.

We believe there are several topline reforms BLM needs to make to the federal coal program if it is going to achieve a fair return for taxpayers. I will outline three here today:

First, BLM should increase royalty rates.

  • Federal coal has one of the lowest effective royalty rates among natural resources managed by the BLM – rates have not increased for nearly a century, since the passage of the Mineral Leasing Act in 1920.

BLM should also update how it calculates the sales value of federal coal.

  • Royalties should reflect the market value of coal in today’s marketplace.  Recent changes to the marketplace, most notably the shift in domestic demand, the increase in coal exports, and the integration of the coal industry – have undermined the current system of calculating royalties on federal coal.

Finally, BLM should create more competition for federal leases.

  • The Lease by Application process results in non-competitive and below fair-market bids for coal leases.  In practice, individual companies draw out their own boundaries for development prior to BLM offering that parcel for “auction.” This allows the industry, not the taxpayer to maximize economic benefits.  According to the DOI Inspector General, more than 80 percent of coal leases in the Powder River Basin during the last 20 years received only a single bidder and no leases received more than 2 bids.

TCS produced a report on the coal program in 2013 and has provided detailed comments to the Department of the Interior with more specific reform recommendations which can be found on our website www.taxpayer.net/coal.  We would be happy to discuss our proposals with DOI staff at any time.

We urge BLM to take this opportunity to be aggressive in making changes to the long-troubled coal program.  No private landowner would maintain a system of pricing in the face of dramatic changes to the marketplace and repeated failures of their existing system.  We are long past time for change.

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