Energy

White House Says Raising Taxes On Coal Would ‘Improve Economic Efficiency’

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Michael Bastasch Energy Editor
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The White House released its report on the effects of raising royalty rates for coal mining on federal lands, and in it, officials argue raising rates on coal — therefore decreasing production — would “improve economic efficiency.”

“Although the focus of this report is on ensuring a fair return to the taxpayer, there is strong economic evidence of large external costs from coal production, transportation, and consumption,” the White house reported Wednesday.

“For example, incorporating the social cost of carbon in coal royalties would imply a royalty rate greater than 100 percent, implying that an increase in royalty rates could improve economic efficiency both due to fair return to the taxpayer and environmental externality considerations,” officials wrote.

The report is part of the Obama administration’s plan to reform coal leasing on federal lands. For years, environmentalists have argued the government wasn’t charging coal companies enough to mine on public lands, mostly in Wyoming and Montana, which activists say hurts the environment and shortchanges taxpayers.

The Obama administration agreed and put a moratorium on new coal mines on federal lands while bureaucrats review the possibility of raising coal mining rates. Environmentalists cheered the move, but the coal industry was less than happy.

“Today’s White House report once again puts politics ahead of practicality,” Laura Sheehan, lead spokeswoman for the American Coalition for Clean Coal Electricity, said in an emailed statement.

Obama’s coal moratorium could last for years, as federal regulators figure out how much more to charge drillers. White House advisers now report the royalty rate hike will shrink coal production seven percent — not exactly good news as nearly 13,000 miners lost their jobs in the last year.

Coal supporters just see this as an extension of Obama’s so-called “war on coal.”

“At a time when millions of low- and middle-income families are struggling to pay their electric bill, any decision that further restricts access to affordable power from coal should be followed by a legitimate explanation,” Sheehan said. “Unfortunately, it seems the only answer the administration is willing to provide is one that conflates issues and picks winners and losers in our energy markets.”

The White House, however, said increasing royalties is meant to get a fair return for taxpayers, even though hiking rates could mean less coal produced overall. The White House also sees this as a way to cut carbon dioxide emissions, helping the U.S. to meet its global warming goals.

“On net, increasing royalty payments to ensure a fair return to the taxpayer would decrease total coal production in the United States and also decrease total nationwide emissions,” according to the White House report.

“For example, assessing royalties on the price of nearby regional coal would reduce emissions by an estimated 12 million metric tons of carbon dioxide annually while utilizing prices for either non-Federal coal nationwide or for natural gas yields emission reductions of approximately 32 million metric tons annually,” officials wrote.

On the other hand, if the Obama administration is concerned about revenues, they could open up more lands to coal mining. Obama’s moratorium on new coal mines could cost taxpayers $88 billion a year from keeping more land off-limits to mining, according to a report by the Institute for Energy Research.

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