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Federal Coal Royalty Changes Would Bring More Money to MT

GRAPHIC: Federal coal royalties are being reviewed, and changes could mean millions more for Montana according to a new Headwaters Economics report. Graphic courtesy of Headwaters Economics.
GRAPHIC: Federal coal royalties are being reviewed, and changes could mean millions more for Montana according to a new Headwaters Economics report. Graphic courtesy of Headwaters Economics.
January 28, 2015

BOZEMAN, Mont. - Federal royalties for coal on public land are getting a checkup. The Office of Natural Resources Revenue is considering changes, and a report released today by Headwaters Economics looks at what that might mean for Montana and other coal states.

Report author Mark Haggerty said the current system has loopholes that have meant about $850 million was not collected from 2008 to 2012. The report recommends that royalties be calculated based on market value instead of the mixture of valuations that exist now.

"That simplified structure creates transparency," Haggerty said. "it greatly simplifies and reduces the cost of administering the royalty program, and it ensures a fair return to taxpayers."

Haggerty said the reason this is so important is that coal markets have changed. U.S. coal now often is destined for overseas markets, and the original system was designed with domestic supply in mind - so keeping prices low would benefit the U.S. economy, not that of another country.

"Complicated" is how Haggerty described the coal royalty system.

Other considerations: When higher federal royalties are collected, it would mean less state revenues in certain taxes. So, the report delved into those consequences.

"The increase in royalty distributions from the federal government would exceed the lower state revenues that they would collect directly," Haggerty said. "So, states would benefit from higher royalties."

The changes also may include reducing coal companies' deduction for transportation costs - currently at 100 percent. A decision on changes in the royalty system is expected this spring.

The report is online at headwaterseconomics.org.

Deborah Courson Smith/Deb Courson Smith, Public News Service - MT