HomeWorld BusinessUS taxpayers poised to subsidise Asian coal demand

US taxpayers poised to subsidise Asian coal demand

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WASHINGTON – Asian economies, hungry for coal, stand to gain from a United States programme meant to keep domestic power cheap and abundant.

At issue is how much miners will pay the government to tap the coal-rich Powder River Basin in eastern Montana and Wyoming. Much of the basin is on federal land.

Selling that coal cheap at a time of increasing exports across the Pacific could amount to a US taxpayer subsidy for industrial rivals like China.

Government auditors have long faulted lax oversight of the coal lease programme, saying miners have too much sway.

Officials have defended the system, saying their approach is the right one to help utilise a region that provides a large share of the country’s power.

That argument has crumbled as more coal from federal land is being sold overseas and Asian economies anticipate gains from the programme meant to keep lights on in American homes.

If US miners can find ports to reach Asian markets easily, it could mean hundreds of millions of dollars in additional profits and marginally lower coal prices for countries in those markets.

US coal exports have steadily climbed since 2009 and are on track for a record high this year, as miners such as Peabody Energy and Arch Coal scramble to ship surplus coal overseas in deals that can double or triple their margins, analysts say.

That dynamic raises questions about whether taxpayers are essentially helping Asian economies save on energy costs, according to six former officials who served both Democratic and Republican presidents. The possibility of large-scale exports was far from their minds when they managed federal land years ago.

“A key question is whether the taxpayer is getting a fair return on the use of those lands,” said Lynn Scarlett, who served as a deputy to two secretaries of the Interior under President George W  Bush between 2005 and 2009.

The investigative arm of Congress, the Government Accountability Office, is examining whether miners are paying fair market value for coal on federal land.

The Bureau of Land Management, which oversees coal leases for the Department of the Interior, points out that the programme has generated more than $9 billion in revenue in the last decade.

“It should be noted that the Bureau is obliged . . . to obtain fair market value, not maximise value, for federal coal,” a department spokeswoman said on Wednesday.

Questions about the coal lease programme could frame an intensifying debate about how the US should manage its abundance of fossil fuels and achieve energy independence.
-Reuters

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