What’s wrong with this picture?
We give huge breaks to coal and utility companies to make electric generation from coal artificially cheap then require utilities to cut back using it. There are many Federal, State and local subsidies to coal and its transport. In many places, this helps make coal the least expensive way to generate electricity. If we cut these subsidies, coal prices will increase to a realistic higher level and utilities will use less as alternatives become more attractive.
President Obama should consider adding these actions to his executive order list:
1. Order the Bureau of Land Management to set a fair price for coal leases. 43.2 percent of U.S. coal comes from public lands. The nation’s largest coal producing region, the Powder River Basin in Wyoming, is not legally classified as a “coal-producing region.” This means that coal tracts within it are rarely competitively leased, which shortchanges taxpayers for the value of the land and the coal underneath it. The BLM is being investigated for leasing coal well under the estimated fair market value. Only four of 26 major Powder River Basin BLM coal sales since 1991 have had more than one bidder, and the four that were “competitive” only had two bidders each. One group estimated that U.S. taxpayers will be shorted in the neighborhood of $29 billion.
2. Order the US Army Corp of Engineers to charge coal (and oil) barge companies the full cost of river dredging, lock and dam construction and maintenance. Coal accounts for 58% of barge cargo on the Ohio River. And, US taxpayers pay for 90% of inland waterway locks and dam construction and maintenance. The barge industry wants 95%. The US Army Corp of Engineers spends almost $5 billion a year mostly on river dredging. They justify these projects by the money they save industry at taxpayer expense. For one example, the USACE justified spending $160 million of US taxpayer money to save coal utilities $300 million a year compared to other modes of transportation. Even the conservative Forbes magazine calls massive subsidies to river transportation in the US “corporate welfare.”
3. Order US government agencies to cut loans, guarantees and incentives for railroad development primarily to haul coal. In 2009, coal accounted for 47 percent of tonnage and 25 percent of revenue for U.S. railroads. U.S. railroads get loans and loan guarantees from government agencies like the Department of Transportation/Federal Railroad Administration and have received numerous tax incentives for investments in new infrastructure.
4. Cut tax breaks for coal if possible through executive order. Currently coal companies can:
- Expense exploration and development costs. (Coal companies can expense costs incurred by locating coal ore deposits.)
- Take a percent depletion for hard mineral fossil fuels (coal companies can claim a tax deduction to cover the costs of investments in mines.)
- Stop capital gains treatment for royalties: (Some coal royalties are treated as long-term capital gains, so they are taxed at a lower rate.)
5. Tell states that they should consider the negative economic and environmental impact of their subsidies to coal. For example, in Illinois, “Taking all revenues and expenditures into account, we estimate that the coal industry’s impact on the Illinois state budget in Fiscal Year 2011 amounted to a net cost of $19.8 million.” Similar results were found in other coal mining states.