White House economists say US coal program costing taxpayers

US coal program

The treasury is supposed to collect a 12.5 per cent royalty on coal sold under the US coal program where coal is sold from surface mines on federal land, however, the real share is closer to 5 per cent.  Reuters photo by Jim Urquhart.

US coal program loopholes shortchange taxpayers

By Patrick Rucker

WASHINGTON, June 22 (Reuters) – A U.S. program meant to encourage coal mining on federal land is open to industry abuse and costs taxpayers billions of dollars in lost revenue every year, a White House study to be released on Wednesday concluded.

Roughly 40 percent of U.S. coal comes from federal land and taxpayers are being shortchanged on those sales due to lax oversight and permissive royalty rules, according to the report from the White House Council of Economic Advisors.

“The program has been structured in a way that misaligns incentives going back decades,” according to the report.

Officially, the U.S. Treasury is supposed to collect a 12.5 percent royalty on coal sold from surface mines on federal land, but the real share is closer to 5 percent due to loopholes and allowances, the report found.

“Companies have employed several tactics to lower the selling price of coal without losing revenue,” it said.

Among industry maneuvers the report highlighted: coal operators sell to sister companies at low prices or collect penalty payments from utilities that reject coal deliveries.

The government is cut out of those payments, the report found, while reforms could yield an extra $3 billion a year.

The federal coal program was once seen as an energy policy tool rather than a way to generate big revenues, former officials have said.

But in an effort to curb climate change, U.S. President Barack Obama has used his time in office to promote renewable fuels and discourage the development of fossil fuels.

Early this year, the Obama administration halted new coal-mine leasing while officials look to improve the program — another blow for a coal industry already shaken by competition from natural gas and weak demand from China.

The Interior Department has said the coal lease freeze should persist for years, but that will be left to the new president elected on Nov. 8.

Presumptive Republican presidential candidate Donald Trump has vowed to renew coal industry jobs, while his presumptive Democratic rival Hillary Clinton has said she would support coal communities as the nation weans itself off fossil fuels.

Whatever the environmental costs, Wednesday’s report shows that the federal coal program is a fiscal loser, said Brian Deese, an Obama adviser.

“This is a hard look at the economics. And what we see is a program that, even before getting to the environmental considerations, is not serving the interest of taxpayers,” he said.

(Reporting by Patrick Rucker; Editing by Susan Heavey and Alan Crosby)

Posted in: Energy News

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