Prepared remarks of Taxpayers for Common Sense President Ryan Alexander before the Department of the Interior in Casper, WY on ways it can ensure fair return for federal taxpayers:

My name is Ryan Alexander and I am the President of Taxpayers for Common Sense.  Taxpayers for Common Sense is an independent, non-partisan budget watchdog.  Our mission is to achieve a responsible federal government that operates within its means.  

Ensuring a fair return for taxpayer-owned natural resources and other assets has been one of our guiding principles since we were founded 20 years ago.   At Taxpayers for Common Sense, we work to ensure that taxpayers receive appropriate compensation for all resources developed on federal land; including hard rock minerals, oil, gas, coal, wind, and solar. We’ve tracked subsidies to each of these industries and emphasized the need for a transparent leasing and royalty collection process.

Everyone in this room knows the coal industry is in a period of change, and those changes are cause for concern for many, particularly true here in Wyoming, where 90 percent of coal from federal lands is produced.  But despite this anxiety, the current review of the federal coal program is both warranted and well-timed. Demand for coal is down, the industry is in flux, and there is a 20 year supply in the pipeline already under lease on federal lands.  

Meanwhile, recent investigations have found continuing problems with the federal coal program.  The system bears no resemblance to the one originally envisioned by Congress and fails to meet the goals set forth by the last major review of the program, which was conducted thirty years ago, during the Reagan administration. Today’s coal leasing program suffers from a lack of competition, problems with valuation, and a lack of transparency.

For the last 25 years, coal companies have proposed tracts of land to be put up for sale by BLM through a lease-by-application process. In the last 20 years, close to 90 percent of these sales had only a single bidder.  

The lack of competition for federal coal leases makes the process of determining a fair market value for coal difficult and controversial. There are legitimate problems attempting to value lease tracts that lack competitive appeal because they have been drawn to maximize profits of the bidder, not the taxpayer. Because of the lack of competition, comparisons for the purposes of appraisal are difficult.

Interior also undervalues federal coal when it is sold. Coal companies often sell coal to a subsidiary that turns around and sells it again for a much higher price. Interior collects royalties on the lower price. According to the Energy Information Administration, these captive sales accounted for more than 30% of coal sales in Wyoming and Montana in 2013.

Then there is the shroud of secrecy that surrounds BLM’s work. BLM does not disclose how it estimates fair market value, in defiance of its own rules. The bids for leases are sealed. BLM cannot provide an accounting of the number of leases with reduced royalty rates. The process BLM uses to make sure taxpayers get fairly compensated is a black box.

All of this is important to federal taxpayers, especially those who live in states with significant coal production from federal lands. As recent Inspector General and Government Accountability Office reports have documented, undervaluation by even a single penny per ton would result in a multimillion dollar revenue loss. Undervaluation and problems with the coal program have already cost taxpayers billions of dollars.

Thank you for conducting this review of the coal program.  Interior has a fiduciary responsibility to ensure that taxpayers are fairly compensated for the assets we all own.  Coal is an important part of our energy mix and will remain so for decades to come. The coal industry and the federal coal program can emerge from this review better prepared to meet today’s energy market.  With a $19 trillion debt, we cannot afford to wait any longer to fix this broken system that shortchanges taxpayers.