CHAPTER 17 POSITION PAPER OF WESTERN MINING ASSOCIATIONS

• Jurisdiction: United States

Federal Royalty Revolution--Coal
(Nov 1986)
CHAPTER 17
POSITION PAPER OF WESTERN MINING ASSOCIATIONS

Western States Coal Consortium Position Statement

Subject Federal Coal Leasing Act Amendments of 1976 Coal Royalty Calculations

Position The base for calculating federal coal royalty payments should be the f.o.b. price at the mine less all local, state and federal taxes, royalties, fees and similar assessments.

Background The federal government owns land containing some 200 billion tons of coal which is in excess of 50% of the coal reserves in the Western United States.

In 1976, Congress passed the Federal Coal Leasing Amendments Act (FCLAA) amending the Mineral Lands Leasing Act of 1920 (MLLA). FCLAA provides, in section 7, that new federal coal leases issued after 1976 shall require the payment of production royalties in an amount established by the Secretary of Interior of not less than 12 1/2% "of the value of coal as defined by regulation," except that a lesser

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amount may be established for underground coal. Prior to 1976 most coal was leased on a cents-per-ton basis. The majority of the leases were for 15-20 cents per ton regardless of the value of the coal. In retrospect, many persons, both within and without the federal government, now agree that the arbitrary establishment of a 12 1/2% royalty floor was based upon a misapplication and inappropriate transfer of the same percentage which has long been recognized as a standard in the oil and gas business, but which, in the case of...