March 8, 2018 Read More →

In Secret Filings, Utah Coal Company Presses for a Break on Its Federal Lease Payments

Salt Lake Tribune:

Utah’s largest coal producer is seeking a tax royalty reduction potentially worth millions of dollars on what it owes for federal coal leases mined at the Sufco Mine outside Salina, yet virtually no information is publicly available regarding the request.

In confidential filings submitted to the Bureau of Land Management, Bowie Resource Partners has asked for a reduction that leaseholders are allowed to seek when they run into unforeseen difficulties extracting coal.

The federal agency is poised to approve the reduction, but citing the coal company’s need to protect trade secrets, BLM officials won’t divulge how large a royalty cut Bowie is seeking, how much coal the relief would cover, or what mining complications Bowie is encountering.

Bowie’s request only became public after the Utah Division of Oil, Gas and Mining (DOGM) signed off on the reduction request. In a Dec. 5 letter to the BLM, DOGM director John Baza claimed that the coal won’t be “economically recoverable” without relief from the usual 8 percent royalty.

Underground mines tapping coal on federal lands pay an 8 percent royalty on the value of their production, minus allowances for transportation and processing costs. At today’s depressed coal prices, it amounts to about $2.80 per ton, which is shared with the state.

Utah’s most productive coal mine, Sufco yields more than 5 million tons a year, although its production is trending down of late as the power-generating industry switches to cleaner energy sources.

Royalty reductions are not unusual, but nor are they routine. Requests require extensive documentation to demonstrate a need for relief. They often take a couple of years to process and are applied retroactively as a credit on future royalty obligations. Companies must certify each year that the mining conditions justifying the reduction still persist.

The standard reduced rate is 5 percent.

Bowie’s two other Utah mines, Dugout and Skyline, have also sought reductions, as have the now-shuttered Horizon, West Ridge and Deer Creek mines over the past 20 years.

More: Outside the public eye, feds poised to grant millions of dollars in tax royalty relief to struggling Utah coal mines

 

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