February 28, 2017 Read More →

U.S. Coal Companies Dodge Federal Royalty Reform

From the Washington Post:

The Interior Department has informed coal, oil and gas companies this week they do not need to comply with a new federal accounting system that would have compelled them to pay millions of dollars in additional royalties.

The Office of Natural Resources Revenue’s new method of calculating royalties for minerals extracted on federal land — which was finalized last July and took effect Jan. 1 — was aimed at preventing firms from underpaying what they owe by selling coal to subsidiaries at an artificially low price. But energy firms, some of whom challenged the new rule in court, called the requirements confusing, complicated and onerous and pressed for a delay.

Companies were set to file their first reports under the new rule Tuesday.

Lawmakers in both parties have questioned whether the current method of royalty collection for coal mined in the Powder River Basin, which encompasses parts of Wyoming and Montana, accurately compensates taxpayers. Firms are required to pay a royalty of 12.5 percent on the minerals they extract from federal land when they are first sold, but many coal companies initially sell to affiliates at the same price per ton that they pay the federal government for extracting it.

By doing that, they avoid paying royalties on the higher price the affiliated companies receive on the open market. According to the U.S. Energy Information Agency, 42 percent of coal transactions in Wyoming took place between affiliated companies.

Interior spokeswoman Heather Swift said in an email that her department delayed the rule’s effective date “to allow the administration time to conduct a detailed review of the rule and the compliance burden it puts on job creators. The Department will make a definitive decision in the future.”

Coal, oil and gas companies to pay less in royalties after Interior decision

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