Cleaning Up Coal's Act

The first in a series looking at the five most significant natural resource reforms during the Obama administration and the five reforms the next administration needs to tackle.

If public lands are owned by the American people, shouldn’t taxpayers get their fair share of profits from gas, oil, and minerals that private companies pull out of that ground and sell on global markets?

That’s the premise of the Project On Government Oversight’s work on holding the government accountable for the way it does business with companies that extract natural resources from public lands. Over the past eight years, the Obama administration has made some welcome progress on getting taxpayers more bang for the buck from natural resources, but there is still a long way to go.

In this post, we’ll look at one reform that was achieved in the past eight years followed by one reform that still needs to be made.

THE VICTORY: Oil, gas, and coal regulations overhauled for first time in decades

This year, the Interior Department took a huge step towards ensuring that taxpayers get their fair share of profits from the extraction of oil, gas, and coal on federal lands. Since 1989, a loophole has allowed companies to cheat taxpayers by selling natural resources on the cheap to a subsidiary, paying royalties to the federal government based on that low price, and then selling the product to an unaffiliated company for a huge profit that wasn’t subject to royalty payments—a system that may have cost taxpayers billions of dollars.

The new regulations finally closed that loophole.

THE FIGHT GOES ON: More changes needed in the federal coal program

Despite closing the above loophole, the Interior Department’s coal regulations are still woefully outdated. In fact, the agency is so concerned about them that, earlier this year, it stopped issuing new coal leases until a review is complete in order to prevent further financial loss to taxpayers.

While the agency is investigating whether taxpayers are receiving a fair return from federal coal royalties, experts have found that Interior is granting companies enough deductions that they are paying only a fraction of the statutory royalty rates of 12.5 percent for surface mining and 8 percent for underground mining. It’s time for Interior to rethink how it does business and completely overhaul this outdated program.

Upcoming: The troubled Minerals Management Service is dissolved...but the government is still giving away minerals on federal lands.