NMA Exposes Critics of Coal Lease Program

Washington, D.C.–Demands this week by Democratic senators that Interior Secretary Sally Jewell raise royalty rates on federal coal sales are based on a “transparent contradiction,” allegations that “are entirely without foundation,” and reports without any factual or analytical rigor, said the National Mining Association today in a letter to the secretary.

NMA President and CEO Hal Quinn underscored the fundamental contradiction in the demands by coal’s critics to keep coal in the ground and address climate change, while at the same time increasing the return to taxpayers from the federal coal program. “Undeniably, imposing more burdens on federal coal production will yield less, not more, revenue to the federal, state and local governments,” Quinn said.

The premise that coal leased from federal land deprives taxpayers of a fair return is equally spurious. Quinn said the overwhelming evidence presented by the coal community to the Department of the Interior during its listening sessions on royalty rates established that the coal industry today pays more than its fair share, with a 39% total effective tax rate levied on coal leased through the federal program when all taxes and up-front bonus bids are accounted for. “Contrary to the claim that federal coal producers ‘enjoy’ subsidies, they actually ‘suffer’ economic penalties through above-market royalty rates, bonus bids and valuation policy,” said Quinn.

Polemical reports by the Center for American Progress (CAP) and Headwaters Economics claiming the federal coal program subsidizes producers ignore these documented facts while deliberately or incompetently manufacturing others. Quinn cited a devastating critique of the Headwaters study by Energy Ventures Analysis* and the many false arguments clumsily recycled by CAP that “lack any factual foundation and exhibit a serious lack of understanding of energy markets.”

Quinn noted that once these arguments are exposed as lacking any factual foundation, their proponents quickly pivot to petitioning the secretary to impose a carbon or energy tax. Quinn commended the secretary for correctly recognizing the limits of executive authority and acknowledging that such a tax is a matter for Congress to decide.

“The determination of coal’s critics to destroy this industry, the high wage jobs it creates and the low cost electricity it provides is seldom clearer than in these calls to raise royalty rates that are already too high,” Quinn concluded. “And the arguments they use are seldom weaker than they are in this case.”

*Energy Ventures Analysis, Inc., Coal Prices Used for Valuation and Payment of Federal Royalties: A Peer Review of Previous Studies by Headwaters Economics (Sept. 16, 2015).