A bill to overturn a temporary ban on federal coal leases — while also giving state and local governments a bigger say in leasing — was approved Thursday by the House Natural Resources Committee.
Western lawmakers have been demanding for months that federal officials end the coal-leasing ban, which Department of Interior officials imposed last spring while they tried to determine whether the public is getting a fair royalty payment on federal coal.
U.S. Rep. Ryan Zinke, R-Mont., authored the bill, which added a twist to the leasing ban debate by creating a royalty policy committee from which state, tribal and energy interests consult the Department of Interior. A state would need to have $10 million in leasing royalties annually to be considered for the committee. The bill seeks to end the leasing ban in 2019.
“States and tribes possess critical local knowledge that should help mitigate the impact of federal regulation, and I think their voices need to be heard,” Zinke told Natural Resource Committee members Thursday.
There were opponents. Rep. Alan Lowenthal, D-Calif., cited the conclusions of the White House Council of Economic Advisors, which indicate the public is not getting a fair price for federal coal.
“A review of the coal leasing program indicates that programs have been structured in a way that misaligns incentives going back decades, resulting in a distorted coal market with an artificially low price for most federal coal and unnecessarily low government revenue from the leasing program,” Lowenthal said.
Coal state lawmakers bristled at the suggestion that royalties were set too low, given that mining companies have gone bankrupt and the amount of coal mined has dropped sharply. The Department of Interior has recommended a royalty increase to 18 percent from the current 12 percent.
“If the royalties were so low from federal lands, we wouldn’t have this massive reduction in employment, massive reduction in the amount of coal produced, massive layoffs in the railroad industry that hauls the coal out of my state,” said Rep. Cynthia Lummis, R-Wyo.
Thursday afternoon, Zinke and Sen. Steve Daines, R-Mont., said the ban on new federal coal leases has added uncertainty to the Powder River Basin coal economy, and that’s stifled investment. In the Senate, Daines and Sen. Jon Tester, D-Mont., have both attempted to put stop dates on the Department of Interior’s coal leasing ban. Tester has proposed Interior take no longer than 5 years to study the royalty issue. Daines is pushing for 3 years.
“My concern is that if we wait five years, we’re not going to have any coal jobs left,” Daines said.
Getting the coal advisory committee formed should also bring some pressure on Interior to the respond to the consequences of federal coal policy on local economies, Daines said.
There was previously a coal advisory board that was allowed to expire, Zinke said. The new board will function the same way, advising Interior, but giving orders with which the department must comply.
Interior official disagree with concerns by lawmakers that the leasing ban is driving the mining industry into the ground. The department estimates there’s a 20-year coal supply available now without new leases. It’s expected to take several years to establish a more equitable royalty rate, Interior estimates.
Even with coal to mine, coal communities are struggling as power plants switch to cheaper natural gas and global prices for coal slump because of oversupply.
Montana's Musselshell County faces a $300,000 shortfall because of slumping coal taxes and the local school district is paying a $9.8 million construction bond as Signal Peak Mine, its largest taxpayer, falters.
The Crow Tribe has cited lost coal revenue at its southeast Montana mine for a multimillion deficit in the tribal budget. Quarterly payments from the Absaloka Mine, operated by Westmoreland Coal Co., were off $1.2 million in 2015. The tribal government furloughed a quarter of its workers in January.
Coal production in Montana is down a third from last year.
In Wyoming, the state government is bracing for a $250 million to $500 million cut in state spending because of declining coal production, expected to be off 100 million tons from 2015.