Insight: U.S. taxpayers poised to subsidize Asian coal demand

Thu Oct 18, 2012 5:49am EDT
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By Patrick Rucker

WASHINGTON (Reuters) - Asian economies, hungry for coal, stand to gain from a U.S. program meant to keep domestic power cheap and abundant.

At issue is how much miners pay the government to tap the coal-rich Powder River Basin in eastern Montana and Wyoming. Much of the basin is on federal land.

Selling that coal cheap at a time of increasing exports across the Pacific could amount to a U.S. taxpayer subsidy for industrial rivals like China.

Government auditors have long faulted lax oversight of the coal lease program, saying miners have too much sway. Officials have defended the system, saying their approach is the right one to help utilize a region that provides a large share of the country's power.

That argument has crumbled as more coal from federal land is being sold overseas and Asian economies anticipate gains from the program meant to keep lights on in American homes.

If U.S. miners can find ports to reach Asian markets easily it could mean hundreds of millions of dollars in additional profits and marginally lower coal prices for countries in those markets.

U.S. coal exports have steadily climbed since 2009 and are on track for a record high this year, as miners such as Peabody Energy (BTU.N: Quote) and Arch Coal ACI.N scramble to ship surplus coal overseas in deals that can double or triple their margins, analysts say.

That dynamic raises questions about whether taxpayers are essentially helping Asian economies save on energy costs, according to six former officials who served both Democratic and Republican presidents. The possibility of large-scale exports was far from their minds when they managed federal land years ago.   Continued...

Labourers inspect and repair an electricity pylon in Yingtan, Jiangxi province December 21, 2010. REUTERS/Stringer