Relax, Everything is Going to be Okay!

[rjthehunter]

Not sure I am following you correctly, but are you saying that coal royalty payments are to cover the cost incurred by the Feds and State to manage these resources? If so, they are not. Lease payments, cost recovery payments to agencies and various taxes applied to each ton of coal mined largely do that.

For sure the reduced royalty rate will lead to a reduction in some royalty streams. It will also lead to an increase in others. Take my mine for instance. This reduction will immediately put our operation back into a far more competitive position. At the moment my coal royalty payments are $0. This reduction puts me back in the game for contracts. If I am successful, then those royalty payments start back up again. The reduced royalty rate also allows operations to mine currently held reserves that may not have been profitable under the prior rate. This is exactly what it has done for me. A reduction in royalty rate has incredible benefits for high strip ratio operations.

The Feds have always had a program where lease holders could apply for a Royalty Rate Reduction (RRR) to help maximize the minable reserve, therefore maximizing the total revenue back to the Feds and State. To receive a RRR you had to demonstrate that under current economics it was not profitable to mine either entire pits or individual seams. You also had to demonstrate that your total royalty payments would increase. I have applied and received RRR's in the past. I applied in early 2021 for a RRR for two pits. The review of those applications by the BLM, never started until March of 2025. In the past it was a 4-6 month process. The prior Administration sat on its thumbs for 4 years while I had two layoffs and eventually moved to nothing but reclamation. This Admin has a different goal in mind. The folks that I have already been able to re-hire as sure pleased with the outcome.

Name checks out as someone who knows a thing or 2 about coal mining in WY.

Glad to hear business is picking up for you and the future is bright!

 

[Forkyfinder]

For sure the reduced royalty rate will lead to a reduction in some royalty streams. It will also lead to an increase in others.

What increase in royalty stream is possible? Maybe im not understanding - the royalty rate went from 12.5% - 7% which affects local funding. Particularily for schools.

 

[WyoCoalMiner]

What increase in royalty stream is possible? Maybe im not understanding - the royalty rate went from 12.5% - 7% which affects local funding. Particularily for schools.


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Two areas come to mind. 1) The royalty is paid on the FOB price. Our most reliable customer had to switch to a different supplier when we went to reclamation. That supplier sells their coal for roughly 1/4 the price per ton that we will get. The difference in cost to the customer is shipping. We are 7 miles away, they are are on the opposite side of the State. These are not exact but directionally correct numbers. My coal sells for $40/ton, theirs for $10/ton. I sell 2,000,000 @ 7% royalty, the royalty payment is $5.6M. They sell the same 2,000,000 even at the prior rate of 12.5%, the royalty payment is only $2.5M. Ours is relatively small market but there are other niche markets serviced by local mines that will benefit in a similar way.
2) BLM coal leases are a very long term arangement. Some of our leases were first gotten in 1979. Since that time so many cost variables have changed. Coal that in 1979 we believed to be profitably mined are no longer that way. Therefore those tons would go unmined for ever. Lowering the rate allows for the possibilty that we could have a higher recovery of the total reserve, therefore allowing for increased total tonnage mined over the operation. This exact thing will happen where I work because of this.

Add on top of that taxes, AML fees, BL Fees and wages for the local workforce and keeping a mine profitable will increase the funds going into local economies.

Hope that answers your question.

 

[Big Fin]

Not sure I am following you correctly, but are you saying that coal royalty payments are to cover the cost incurred by the Feds and State to manage these resources? If so, they are not. Lease payments, cost recovery payments to agencies and various taxes applied to each ton of coal mined largely do that.

No, that's not what I'm saying. What I'm saying is the Fed/State/Local royalty revenue split on coal, oil, and gas royalties is an important part of rural government budgets. Cutting the royalty rate doesn't change the fact that local government still has demand for the services their citizens rely on.

In the totality, taking into account your examples of where it might go up or it might go down, the net of it all is a decrease in total royalty revenues to be split. And that cuts into the budgets of local governments.

In effect, Congress is making policy decision, such as cutting royalties (not just coal royalties) that are split with local governments, which get paid for my local taxpayers, leaving the locals with one of two options - 1) pay more taxes to maintain basic services, or 2) go with fewer services local governments usually provide in these rural communities.

For sure the reduced royalty rate will lead to a reduction in some royalty streams. It will also lead to an increase in others. Take my mine for instance. This reduction will immediately put our operation back into a far more competitive position. At the moment my coal royalty payments are $0. This reduction puts me back in the game for contracts. If I am successful, then those royalty payments start back up again. The reduced royalty rate also allows operations to mine currently held reserves that may not have been profitable under the prior rate. This is exactly what it has done for me. A reduction in royalty rate has incredible benefits for high strip ratio operations.

That makes sense.

The Feds have always had a program where lease holders could apply for a Royalty Rate Reduction (RRR) to help maximize the minable reserve, therefore maximizing the total revenue back to the Feds and State. To receive a RRR you had to demonstrate that under current economics it was not profitable to mine either entire pits or individual seams. You also had to demonstrate that your total royalty payments would increase. I have applied and received RRR's in the past. I applied in early 2021 for a RRR for two pits. The review of those applications by the BLM, never started until March of 2025. In the past it was a 4-6 month process. The prior Administration sat on its thumbs for 4 years while I had two layoffs and eventually moved to nothing but reclamation. This Admin has a different goal in mind. The folks that I have already been able to re-hire as sure pleased with the outcome.

I don't disagree with any of that.

Yet, as US taxpayers we have these same people in Congress who want to cut royalties saying that our public lands do not get good returns and therefore should be privatized or given to states. To lower the returns obtained from these lands by their actions in Congress, and then use those lower rates as evidence that Federal lands don't get fair market returns is intellectually dishonest. Congress sets these rates. Yet, Congress then turns the table to say the rates are evidence of bad returns on public lands.

None of this gets into the true economics of subsidies, government interference in markets, etc. It would be hard to make a coherent economic argument for reducing royalty rates even further, when the rates are already below the market rates set by adjacent State, County, and private landowners for the same extraction activities that happen on Federal lands.

On a completely different note, I often wonder the story behind how the coal industry got stuck making payments to Abandoned Mine Reclamation Fund, on top of Federal royalty payments, yet the hard rock mining industry has neither of those operation costs.

 

[Nick87]

Abandoned Mine Reclamation Fund, on top of Federal royalty payments, yet the hard rock mining industry has neither of those operation costs.

Is there many of them that remain abandoned/unrelated in Montana? Hard rock that is. Serious question. They're reclaimed just as fast or faster than they are mined my area.

 

[WyoCoalMiner]

No, that's not what I'm saying. What I'm saying is the Fed/State/Local royalty revenue split on coal, oil, and gas royalties is an important part of rural government budgets. Cutting the royalty rate doesn't change the fact that local government still has demand for the services their citizens rely on.

In the totality, taking into account your examples of where it might go up or it might go down, the net of it all is a decrease in total royalty revenues to be split. And that cuts into the budgets of local governments.

In effect, Congress is making policy decision, such as cutting royalties (not just coal royalties) that are split with local governments, which get paid for my local taxpayers, leaving the locals with one of two options - 1) pay more taxes to maintain basic services, or 2) go with fewer services local governments usually provide in these rural communities.

Net decrease is a reasonable assumption.

That makes sense.


I don't disagree with any of that.

Yet, as US taxpayers we have these same people in Congress who want to cut royalties saying that our public lands do not get good returns and therefore should be privatized or given to states. To lower the returns obtained from these lands by their actions in Congress, and then use those lower rates as evidence that Federal lands don't get fair market returns is intellectually dishonest. Congress sets these rates. Yet, Congress then turns the table to say the rates are evidence of bad returns on public lands.

No argument here. But it is possible to support the reduction while not supporting the transfer or privatization argument. At least for me it is.

None of this gets into the true economics of subsidies, government interference in markets, etc. It would be hard to make a coherent economic argument for reducing royalty rates even further, when the rates are already below the market rates set by adjacent State, County, and private landowners for the same extraction activities that happen on Federal lands.

We operate in the checkerboard. While waiting for BLM to review our RRR, I requested the same from our private landowner. They granted 1 and denied another. The granted request is lower than the current BLM 7%.

On a completely different note, I often wonder the story behind how the coal industry got stuck making payments to Abandoned Mine Reclamation Fund, on top of Federal royalty payments, yet the hard rock mining industry has neither of those operation costs.

Hardrock folks have way better lobbyists.

 

[wyoelkfan15]

Is there many of them that remain abandoned/unrelated in Montana? Hard rock that is. Serious question. They're reclaimed just as fast or faster than they are mined my area.

Has the berkley pit been reclaimed? Honest question, haven't been by it in a few years.

 

[SAJ-99]

You don’t need schools if you can hire kids to dig that coal. Isn’t it about bringing back “the good ole days”?

 

[WyoCoalMiner]

You don’t need schools if you can hire kids to dig that coal. Isn’t it about bringing back “the good ole days”?

View attachment 380629

So 1920’s! Get with the times. We use mules for the work these days.

 

[WyoCoalMiner]

Has the berkley pit been reclaimed? Honest question, haven't been by it in a few years.

It’s a mitigation and research site more than a reclamation project

 

[Forkyfinder]

Two areas come to mind. 1) The royalty is paid on the FOB price. Our most reliable customer had to switch to a different supplier when we went to reclamation. That supplier sells their coal for roughly 1/4 the price per ton that we will get. The difference in cost to the customer is shipping. We are 7 miles away, they are are on the opposite side of the State. These are not exact but directionally correct numbers. My coal sells for $40/ton, theirs for $10/ton. I sell 2,000,000 @ 7% royalty, the royalty payment is $5.6M. They sell the same 2,000,000 even at the prior rate of 12.5%, the royalty payment is only $2.5M. Ours is relatively small market but there are other niche markets serviced by local mines that will benefit in a similar way.
2) BLM coal leases are a very long term arangement. Some of our leases were first gotten in 1979. Since that time so many cost variables have changed. Coal that in 1979 we believed to be profitably mined are no longer that way. Therefore those tons would go unmined for ever. Lowering the rate allows for the possibilty that we could have a higher recovery of the total reserve, therefore allowing for increased total tonnage mined over the operation. This exact thing will happen where I work because of this.

Add on top of that taxes, AML fees, BL Fees and wages for the local workforce and keeping a mine profitable will increase the funds going into local economies.

Hope that answers your question.

Sort of. Thanks for the explanation and deeper understanding. I do have some follow up questions and appreciate your time.

1. Is the FOB price basically "the unshipped" price? I get the benefit for your mine and situation - but ultimately im not for subsidies, including the ones my own industry receives.

2. Has tonnage decreased significantly decreased over time?

Ultimately - the critical question for me - Would Wyoming households be for paying an extra 200ish dollars in taxes (50 Million / 240k households) to maintain funding (or be okay with 50M in less funding) and give coal mining a further discount on mining public land?

Im not sure they would be for that - but they are going to find out thats exactly what they got soon.

 

[BuzzH]

Has the berkley pit been reclaimed? Honest question, haven't been by it in a few years.

No, I worked on some reclamation projects in the upper Clarks Fork back in the late 90's. From what I saw, there is no way to come close to cleaning that up, it will be a mess forever.

The pit is the same, its going to be there forever as a case study in precisely what not to do.

 

[Big Fin]

Is there many of them that remain abandoned/unrelated in Montana? Hard rock that is. Serious question. They're reclaimed just as fast or faster than they are mined my area.

Depends. In many instances it has taken decades. Unfortunately, we have a history of the hard rock miners using their political connections to be very naked when it comes to bonding requirements.

That said, we have some great operators who've done it right. Most everyone is impressed with how the Stillwater Mines did it. Say the name Pegasus Gold and you'll get an entirely different response.

 

[MTGomer]

It’s a…… hiring spree?

 

[SAJ-99]

So 1920’s! Get with the times. We use mules for the work these days.

But blaming the government never changes.

 

[WyoCoalMiner]

Sort of. Thanks for the explanation and deeper understanding. I do have some follow up questions and appreciate your time.

1. Is the FOB price basically "the unshipped" price? I get the benefit for your mine and situation - but ultimately im not for subsidies, including the ones my own industry receives.

Yes

2. Has tonnage decreased significantly decreased over time?

Yes. Drastic decrease since 2010’s for all surface coal operations in the West. I suppose it’s semantics, but I don’t see royalty rate as a subsidy but rather a cost of doing business. Reducing the royalty will undoubtedly prolong the life of many coal mines. 7% is better than the fast approaching 0.

Ultimately - the critical question for me - Would Wyoming households be for paying an extra 200ish dollars in taxes (50 Million / 240k households) to maintain funding (or be okay with 50M in less funding) and give coal mining a further discount on mining public land?

Wyoming is going to grapple with this problem at some point. The contributions to government coffers has been declining. In the short term a reduction in royalties will happen but it has a real potential to delay the race to zero.

Im not sure they would be for that - but they are going to find out thats exactly what they got soon.

We already know this but as with all taxpayers we really like it when someone else pays for stuff.

 

[WyoCoalMiner]

But blaming the government never changes.

Truth can be difficult for some to accept

 

[SAJ-99]

Truth can be difficult for some to accept

True. Seems the reality you described is you can only make money if you shaft the landowner and local school district.

 

[BrentD]

You don’t need schools if you can hire kids to dig that coal. Isn’t it about bringing back “the good ole days”?

View attachment 380629

You can now put them back to work in the meat packing houses. Especially to relace those legal immigrants that have bee deported.

Got your kids signed up?

 

[Forkyfinder]

I suppose it’s semantics, but I don’t see royalty rate as a subsidy but rather a cost of doing business.

Do you mine on any private land? Whats the cost there?

7% is better than the fast approaching 0.

Well it'd be zero for the federal govt - but i have a feeling itd be more than 7%, right?