WASHINGTON Feb 7 (Reuters) - U.S. officials wrongly advised coal companies when they leased federal land in a flawed program costing taxpayers millions of dollars, according to an independent review of the U.S. Interior Department.
The department's Bureau of Land Management is responsible for protecting taxpayers when it doles out leases and collects royalties on coal sales.
Lease auctions are supposed to be blind, with officials seeking a fair price for taxpayers. But those auctions have been tainted by information-sharing with mining companies, the Interior Department's independent Inspector General Mary Kendall concluded.
"Some BLM state and field offices have conferred with the mining company during the sales process to expedite the completion of a coal lease sale," the IG said in a letter to Senator Ron Wyden of Oregon that was released on Friday.
"In our view, this is a form of negotiation currently prohibited by law and regulation."
Wyden, a Democrat, is due to step down soon as chairman of the Energy and Natural Resources Committee to become chairman of the Senate Finance Committee.
In a letter to Interior Secretary Sally Jewell, Wyden said that he had "deep concerns" about the federal coal lease program.
Wyden wrote that he is particularly concerned about weak oversight in coal-rich regions such as the Powder River Basin in eastern Montana and Wyoming, where the black rock can be found in 10-story seams.
While most of that fuel has gone to feed domestic furnaces, government officials have largely ignored the increasing amount that is exported, officials have said.
Early last year, former Interior Department Secretary Ken Salazar ordered an investigation into whether miners were wrongly using affiliated brokers to skirt royalty payments.
U.S. taxpayers are due a 12.5 percent royalty on coal sales from federal land, but officials want to know whether miners are clearing their sales at artificially low prices through affiliated brokers.
More than 6 million tons of coal were exported from Colorado mines in 2012, according to data from the Energy Information Administration, and about half of that was sold by brokers and traders.
All of the 9 million tons of coal exported from Montana that year was sold through a trading desk.
Arch Coal Inc, Peabody Energy and Cloud Peak Energy are al leading miners on federal land.