Interior’s proposed reforms to natural resource management still have far to go

When the federal government allows companies to extract natural resources from public lands, it has an obligation to ensure companies pay every cent of royalties due to the public. After all, federal lands belong to all Americans, and it’s the government’s job to responsibly manage that land on our behalf.  

However, the system that governs coal royalties is deeply flawed. Loopholes and outdated laws mean that companies may not be paying their fair share for using public land, a fact Secretary of the Interior Sally Jewell called out in a speech in March.  But with recent action from her department, that may soon change. 

{mosads}In the past few months, the Interior Department’s Bureau of Land Management (which issues leases to companies that plan to extract natural resources from public lands) and Office of Natural Resources Revenue (which collects royalties from those companies) have announced potential changes to the way coal—and oil and gas—are managed on federal lands. 

In January, Interior unveiled a proposed rule that would close a loophole that a Reuters investigation highlighted back in 2012. That is, companies can sell their coal for cheap to affiliated companies, which means the royalties they pay to the government are small and don’t reflect the market value of the coal. Then, the affiliated company sells the coal for a hefty profit to another company, royalty-free.  

While Interior deserves some recognition for seeking to change an outdated law that allows companies to cheat the system, the department still has a long way to go.  

For one, while companies are supposed to pay a royalty of 12.5 percent for surface coal and 8 percent for underground coal, many companies pay a much lower rate because companies are allowed to deduct certain costs, such as those for transporting the coal. Headwaters Economics estimated earlier this year that the royalty rate companies actually pay is as low as 0.7 percent for federal lands in North Dakota.   

Last month, Interior announced that it’s seeking public comments on whether it should change coal royalty rates and how they’re calculated. Simultaneously, Interior is seeking public comments on its management of oil and gas resources and revenues, a program the Government Accountability Office declared at “high risk” for waste, fraud, abuse and mismanagement. 

These calls for public comment are so important because it’s not just people who live in communities where extraction happens who should care. Royalties from natural resources are one of the federal government’s largest sources of revenue—nearly $14 billion last year, which was disbursed to the Treasury, land and water conservation funds, and states, who use these revenues to fund schools, local governments, and infrastructure projects.  

Americans deserve their fair share from natural resources extracted from federal lands. And hopefully, these proposals to reform the way Interior manages coal, oil, gas, and other minerals aren’t where the conversation ends.

Steinle is an investigator with the Project On Government Oversight.