Coal Exports an Economic Benefit for U.S. (Billings Gazette)
Guest opinion: Wyoming, U.S. get good value from coal
The GAO report recommends that the Bureau of Land Management use both comparable sales history and an income approach to determine fair market value for nominated coal leases. GAO notes that “Wyoming goes a step further to numerically adjust its comparable sales using the results of the income approach.”
Taxpayers in Wyoming and across the nation can rest assured they are getting great value, considering that 88.4 percent of federal coal leased from 1990 to 2012 was located in Wyoming.
Potential export growth
The report recommends that BLM take exports into account when determining the fair market value of the coal. In 2011, the last year for which exports were reported by the Energy Information Administration, Wyoming mines exported only 4.5 million of 438 million tons – a little more than 1 percent. Coal mined in Wyoming is overwhelmingly used for domestic energy purposes, and any assertion that revenue is being lost on exports is just wrong.
Exported coal is a potential growth market for Wyoming. When the export market is more significant it may be appropriate for BLM to include export sales in the fair market value estimation. Higher prices for export coal may include transportation costs. However, the value that the royalties are calculated upon is determined by what the coal is sold for at the mine, not what a utility (either domestic or foreign) will pay in order to get the coal delivered to them.
The report acknowledges tracts nominated for lease are generally adjacent to existing mining operations and are nominated by companies that own these operations. They are used to extend the life or to expand that mine’s annual production.
The GAO report refers to 96 coal leases since 1990 that received only a single bid. For a coal lease to be attractive and viable, the bidder must have an opportunity to realize a return on investment. Getting the mineral out of the ground and to the customer at a reasonable cost. It simply isn’t viable to bid on a lease that is not in close proximity to existing operations.
State, federal and local governments receive about 35 percent of the value of the coal produced in Wyoming. Those government imposed costs are the single largest cost paid by the coal industry — more than direct labor or operating expenses. In 2012 total taxes, royalties, and fees collected from Wyoming’s coal production exceeded $1.8 billion. Wyoming’s share was $1.2 billion.
Over the years, bonus bids from the federal coal leasing program have totaled more than $2.6 billion for school construction, community colleges and highways across the state. Every Wyoming county boasts a new school thanks to Wyoming coal.
$750 million payroll
Wyoming also gets value from 7,000 mining jobs with an annual payroll of $750 million. The state with the largest share of federal coal leases is doing it right.
Wyoming coal is shipped to 34 states across the nation as an abundant source of affordable and reliable fuel for electricity generation.
The federal coal lease program creates great value for taxpayers and those who rely on affordable electricity. While there may be room for process improvement, continuing the program is certainly in the best interest of Wyoming and the United States. Those claiming the leasing process is broken and should be subject to a moratorium are just wrong. Political attempts to impugn the leasing process is but the latest in a long series of disruptive tactics employed by anti-coal forces to halt the development of this valuable American resource.
Marion Loomis of Cheyenne is executive director of the Wyoming Mining Association.
See article here.