Monday, October 22, 2012

Coal companies sell cheaply to foreign markets, with help from low-cost federal leases in West

"Asian economies, hungry for coal, stand to gain from a U.S. program meant to keep domestic power cheap and abundant," reports Patrick Rucker of Reuters. Mining companies pay the U.S. government to mine federally owned land in the Powder River Basin in Wyoming and Montana. "Selling that coal cheap at a time of increasing exports across the Pacific could amount to a U.S. taxpayer subsidy for industrial rivals like China," Rucker writes.

Coal exports have increased since 2009, and could reach record highs this year, as companies including Peabody Energy and Arch Coal Inc. rush to sell surplus coal overseas "in deals that can double or triple their margins," Rucker reports. "If [companies] can find ports to reach Asian markets easily, it could mean hundreds of millions of dollars in additional profits and marginally lower coal prices for countries in those markets." Some Pacific Coast towns are fighting efforts to establish and expand coal ports, Lorna Thackeray of the Billings Gazette reports.

The Bureau of Land Management says the program has generated more than $9 billion revenue over the past 10 years. But at least six former federal officials worry this plan essentially means U.S. taxpayers are subsidizing cheap Asian energy. "A key question is whether the taxpayer is getting a fair return on the use of those lands," said Lynn Snarlett, former deputy to Republican interior secretaries from 2005 to 2009. The Governmental Accountability Office is examining whether coal companies are paying fair market value for coal mined on federal lands. (Read more)

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