Coal DOI investigates coal royalty fraud

Published on February 9th, 2013 | by Tina Casey


The Game Is Afoot: Coal Companies Investigated For Alleged Fraud

February 9th, 2013 by  

Didn’t we just mention that the EU is burning more coal, not less? That’s partly because more American coal is streaming into the global market, as the U.S. utility industry has been pushing coal aside in favor of other domestic sources including natural gas as well as solar and wind power.

Well, therein lies a tale. According to our friends over at The Hill, the U.S. Department of the Interior has been connecting the dots, and the agency is preparing to investigate allegations that U.S. coal mining companies have been “skirting” royalty payments for their operations on public land by manipulating export sales.

DOI investigates coal royalty fraud

Coal Export Investigation

As reported by Zack Coleman of The Hill, the alarm was first raised by a series of articles by Reuters in December, which described how U.S. mining companies operating on public lands are lowballing the value of their coal and selling it to affiliated middlemen who then boost the export price. The result is lower royalty payment to the government aka you and me.

The articles caught the attention of Senator Ron Wyden (D-OR), who chairs the Senate Energy and Natural Resources Committee. The result was a request for an investigation, in the form of a letter to Ken Salazar, the outgoing head of the Interior Department, from Wyden and ranking committee member Senator Lisa Murkowski (R-AL).

Undercutting the U.S. by Exporting Fossil Fuels

The money at stake is substantial, so even shaving a little off the top would result in millions in lost revenue. But the direct loss of revenue isn’t the only thing at stake.

By exporting or serving as an export link for fossil fuels, we in the U.S. are undermining our own efforts to manage global warming emissions, while putting our public health and natural resources at risk.

A significant amount of coal from Appalachia, for example, goes to overseas markets, while destructive mountaintop mining practices have buried miles of pristine streams in that region, and undermined both economic and public health in local communities.

Then there’s the proposed Keystone XL pipeline, which would convey tar sands oil from Canada down through the midwest to Gulf Coast refineries for the export market. In addition to adding a particularly “dirty” fossil fuel to the global energy mix, it  has also raised concerns over the risk of pipeline leaks or breaks.

Wyden has also previously raised the point that if the Obama Administration authorizes an increase in natural gas exports, prices in the U.S. would rise and undercut the domestic manufacturing sector. That’s on top of the environmental and public health issues raised by fracking, a natural gas drilling method that has been linked to water contamination among other local impacts.

Trouble Brewing in Wyoming

Specifically, the U.S. EPA has been investigating water contamination linked to fracking in Wyoming, and that brings us right back around to the coal royalty issue.

The coal in question is coming from coal fields in the Powder River Basin, which spans Wyoming and Montana. As The Hill notes in a previous article, there’s a push to build new export terminals for that coal in Washington State and Oregon, and that has raised serious concerns about the environmental and public health impacts of coal transportation.

That’s on top of the royalty issue, which could get pretty interesting. Last week, Salazar wrote back to Wyden and Murkowski to inform them that the Interior Department will undertake a full investigation of coal sales from the Powder River Basin, including a probe of the alleged affiliations between export purchasers and broker/marketers.

Salazar also promised to “aggressively pursue any company found in violation of the laws and regulations related to the valuation of Federal coal.”

We’ll keep you posted.

Image: Sherlock Holmes statue by shining.darkness

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About the Author

specializes in military and corporate sustainability, advanced technology, emerging materials, biofuels, and water and wastewater issues. Tina’s articles are reposted frequently on Reuters, Scientific American, and many other sites. Views expressed are her own. Follow her on Twitter @TinaMCasey and Google+.

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