Center for American Progress

RELEASE: CAP Proposal Would Create Millions of Dollars in Revenue That Could Be Used to Revitalize Appalachian Coal Communities
Press Release

RELEASE: CAP Proposal Would Create Millions of Dollars in Revenue That Could Be Used to Revitalize Appalachian Coal Communities

Washington, D.C. — The Center for American Progress has issued a new proposal aimed at revitalizing Appalachian coal communities. In a report released today, CAP calls for reforms to the U.S. Department of the Interior, or DOI, coal royalties program that would eliminate unfair advantages provided to coal mined on federal lands in the West. These reforms would update an unequal and outdated system for collecting royalties on coal mined from federal lands, which would yield millions of dollars in revenue that could be used to reinvest in struggling Appalachian coal communities.

“Appalachian coal communities face immensely challenging market conditions. Pressures from imported coal, cheaper coal from western federal lands, and an increase in natural gas-powered electricity have all aided in making Appalachian coal producers less and less competitive,” said Gov. Ted Strickland, Counselor to the Center for American Progress and a co-author of the report. “The federal government’s outdated and unfair coal royalties program is severely exacerbating the problem, essentially providing a federal subsidy to coal produced in the Powder River Basin and other coal mines on taxpayer-owned lands. This proposal will level the playing field for Appalachian coal, create a fairer system for coal royalties that better reflects the current coal market, and raise millions of dollars in revenue for taxpayers that can be reinvested in Appalachian communities.”

Currently, the DOI’s outdated federal coal program fails to ensure that mining companies pay royalties on the true market price of the coal that they extract from taxpayer-owned lands. This failure amounts to billions of dollars in de facto subsidies for western coal, artificially driving down coal prices and making it harder for struggling coal communities in Appalachia to compete. Fixing the flaws in this program would raise millions of dollars per year that Congress could reinvest in programs designed to revitalize Appalachian communities, such as those outlined in President Barack Obama’s recent budget proposal.

CAP’s proposal is supported by the AFL-CIO.

“For generations, my family and my closest friends have been a part of the coal-mining community,” said Richard Trumka, president of the AFL-CIO. “Our nation’s energy economy is undergoing various changes, but that shouldn’t mean that those who have helped power this country for centuries should be left behind. I have seen firsthand the economic impact unfairly priced coal can have on workers in these communities, particularly those in Appalachia. The American public deserves a fair price for coal mined from federal land. This proposal does that, while maintaining the Powder River Basin’s position as the least expensive source of coal in the nation and providing a funding source for badly needed investments in Appalachia. Half the money would go to the states where the coal is mined, and it’s important that those communities will also benefit from this proposal.”​

CAP offers two policy options, either of which would level the playing field for Appalachian coal and raise millions of dollars in revenue for taxpayers.

  • Option 1: Increase the royalty rate, minimum bid price, and rental rate for federal coal sales. These standards have not changed in decades, and the royalty rate for federal coal remains out of line with royalty rates for other publicly owned resources, such as oil and gas, on the Outer Continental Shelf. These increases would only apply to new leases and to leases renewed in the future.
  • Option 2: Assess royalties based on the true market value of federal coal. The federal government currently assesses royalties at the first point of sale, which usually happens at the mine mouth. This drastically undervalues the coal because it does not take into account the price paid at the final point of sale by end users, such as coal-fired power plants. CAP’s proposal would require that all royalties be assessed at the final point of sale, better aligning royalty payments with the actual market value of the coal. This change would apply to future coal mined under both existing and new leases.

Click here to read the report.

For more information on this topic or to speak with an expert, contact Tom Caiazza at [email protected] or 202.481.7141.