Senators ask if coal exports skirt royalties

Raulston and other industry representatives said that still can amount to an arm's-length transaction, with royalties paid on the mine price, as long as the original sales price to the broker was not discounted.

A spokesman for Wyoming Gov. Matt Mead, a Republican, said state officials there also had seen no evidence that companies had failed to pay their proper royalties.

Nevertheless, officials from Wyoming, Montana and the federal government are auditing coal sales made over the last several years to make sure companies complied with royalty rules. Those audits could take a year or longer to complete, according to Interior Department officials.

"We will pursue this and make sure they are paying the proper royalties," said Patrick Etchart, a spokesman for Interior's Office of Natural Resources Revenue.

More than 460 million tons of coal was mined from federal lands last year, primarily in the Powder River Basin and in other western states. The federal government collected $875 million in royalties in 2012 on coal sales of more than $8.1 billion. About half of federal royalties are returned to states.

Exports from western states totaled almost 22 million tons in 2011, the most recent figure available. That compares with a little more than 6 million tons exported from western states in 2009.

The Interior Department is working on changes to federal coal royalty regulations that Etchart said will help ensure taxpayers get a fair return on federally owned coal.

As part of that rule-making process, Wyoming's state auditor submitted comments in 2011 saying the definition of arm's-length transactions should be changed to establish that coal company affiliates are not treated as separate entities as far as royalties are concerned.