* Report says valuable coal tracts were sold too cheaply
* Taxpayers stood to lose tens of millions of dollars
* Officials wrongly cleared coal sales in side deals -study
By Patrick Rucker
WASHINGTON, Feb 7 U.S. officials wrongly aided
coal companies seeking federal land leases and accepted
below-value bids in a flawed program costing taxpayers tens of
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
"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," Kendall said in a letter to
Senator Ron Wyden that was released on Friday.
"In our view, this is a form of negotiation currently
prohibited by law and regulation."
The Interior Department is investigating whether miners who
have tapped federal land are wrongly using affiliated brokers
and traders to skirt royalty payments on lucrative coal sales to
Officials found cases of lax oversight and complacency in
some of the biggest coal-exporting states of the West.
In Colorado, where 3 million tons of exported coal were sold
through brokers in 2012, officials wrongly offered coal tracts
at a discount and did not account for the export market, Kendall
"State offices generally did not factor in export prices,"
All of the 9 million tons of coal exported from Montana that
year was sold through a trading desk, according to the Energy
Taxpayers are due a 12.5 percent royalty on coal sales. But
by valuing coal at low domestic prices rather than the higher
price fetched overseas, coal producers can dodge the larger
royalty payout when mining federal land, a Reuters investigation
The Interior Department is serious about protecting
taxpayers' interests, an official said, but its review of
royalties is not due for completion before the end of 2015.
MINERS FACE MORE OVERSIGHT
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
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.
Arch Coal Inc, Peabody Energy and Cloud Peak
Energy all hope to soon reach Asian markets by moving
Powder River Basin coal through Wyden's home state of Oregon.
Wyden said this week that he will "dig deeper" into how
miners book royalty payments. Congressional observers said he
might have more power to do that in his new senate role.
"The Finance Committee looks after the government's money
and, in that light, Wyden could certainly continue to be a
watchdog here," said Steve Ellis of the nonprofit Taxpayer for
Arch Coal, Peabody Energy and Cloud Peak Energy did not
immediately respond to a call for comment.