II 114th CONGRESS 1st Session S. 1891 IN THE SENATE OF THE UNITED STATES July 29, 2015 Mr. Wyden (for himself and Mr. Udall ) introduced the following bill; which was read twice and referred to the Committee on Energy and Natural Resources A BILL To amend the Mineral Leasing Act to improve coal royalties, and for other purposes.

1. Short title This Act may be cited as the Coal Royalty Fairness Act of 2015 . 2. Valuation of coal royalties Section 7 of the Mineral Leasing Act ( 30 U.S.C. 207 ) is amended— (1) in subsection (a), by striking the fourth sentence; and (2) by adding at the end the following: (d) Royalties (1) Definitions In this subsection: (A) Assessment value (i) In general The term assessment value , with respect to Federal coal, means— (I) the price of Federal coal paid by the purchaser at final sale; or (II) a price imputed by the Secretary based on the coal price index. (ii) Exclusions The term assessment value does not include, as determined and to the extent determined to be appropriate by the Secretary— (I) transportation costs, as determined in accordance with the transportation cost index; or (II) the cost of coal washing. (B) Broker The term broker means a person that resells Federal coal. (C) Coal price index The term coal price index means the schedule of average market prices of Federal coal (in United States dollars) paid by the purchaser at final sale, based on the quality and type of the Federal coal, as determined by the Secretary, in consultation with the Administrator of the Energy Information Administration. (D) Purchaser (i) In general The term purchaser means a person that— (I) purchases or contracts to purchase Federal coal— (aa) directly from a coal mine operator; or (bb) indirectly from a broker; and (II) uses that Federal coal in any industrial or energy conversion process. (ii) Exclusion The term purchaser does not include— (I) a coal broker; or (II) any other third-party intermediary. (E) Quality The term quality , with respect to Federal coal, means the quality of Federal coal measured in British thermal units, sulfur, moisture, and other criteria determined to be appropriate by the Secretary. (F) Secretary The term Secretary means the Secretary of the Interior. (G) Transportation cost index The term transportation cost index means the transportation cost index established under paragraph (7). (H) Type The term type , with respect to Federal coal, means a general category of coal, such as metallurgical coal or steam coal, as determined by the Secretary. (2) Payment rate (A) In general Except as provided in subparagraph (B), a lease shall require payment of a royalty in such amount as the Secretary shall determine of not less than 12.5 percent of the assessment value of Federal coal, as determined under paragraph (3). (B) Exception In lieu of the royalty payment rate described in subparagraph (A), the Secretary may establish such lower royalty payment rate as the Secretary determines to be appropriate in the case of Federal coal recovered by an underground mining operation. (3) Valuation for royalties Not later than 1 year after the date of enactment of this subsection, the Secretary shall establish, as the valuation for Federal coal royalties, the assessment value of Federal coal. (4) Administration (A) Reporting The purchaser of Federal coal shall annually submit to the Secretary a report containing such information as the Secretary determines to be necessary to carry out this subsection. (B) Audits To carry out this subsection, the Secretary may examine the records of any person engaged in the purchase, sale, transportation, or marketing of Federal coal. (5) Coal price index (A) In general The Secretary shall compile the assessment values of coal by type and quality of coal in a coal price index. (B) Publication Not less frequently than quarterly, the Secretary shall publish the coal price index, along with a methodological description, including— (i) the method of calculation; (ii) the data used to calculate the coal price index in an aggregate manner that does not reveal proprietary information; and (iii) any other information the Secretary considers appropriate to ensure transparency. (C) Other information If a person believes that the coal price index significantly deviates from the assessment value of the coal produced by the person, the person may petition the Secretary to use information supplied by the person in lieu of the coal price index, including all information the Secretary requires to accurately determine the assessment value and audit the records of the person. (6) Exports (A) In general In assessing royalties for the export of Federal coal under this subsection, the Secretary may obtain from the exporter of the Federal coal such information as the Secretary determines to be necessary to carry out this subsection. (B) Assessment value of exported coal Subject to subparagraph (C), in determining the assessment value of Federal coal that is exported, the Secretary shall— (i) use the price of coal free on board the marine vessel used to transport the coal overseas at the port of origin; and (ii) limit any deductions that apply to the assessment value of the Federal coal to costs incurred prior to being free onboard the vessel. (C) Uncertain export price If the Secretary cannot determine the value of exported coal in accordance with subparagraph (B), the Secretary shall— (i) assess royalties under this subsection based on the coal price index for coal of a similar quantity and type; and (ii) limit any deductions that apply to the assessment value of the Federal coal to costs incurred within the contiguous United States. (7) Transportation cost index (A) In general Subject to the other provisions of this paragraph, the Secretary, in consultation with the Secretary of Energy and the Secretary of Transportation (in consultation with the Surface Transportation Board and others), shall— (i) compile in a transportation cost index the average costs of transporting coal; and (ii) determine the amount of any transportation cost deduction under this subsection, on the basis of the transportation cost index. (B) Unit of measurement The transportation cost index shall be based on the average transportation costs per ton of coal or another unit of measurement determined by the Secretary. (C) Differences in transportation costs The transportation cost index shall take into consideration differences in the costs of transportation, as determined by the Secretary, based on— (i) the mode of transportation; (ii) the geographic region, and (iii) other characteristics of the transportation industry that the Secretary considers to be necessary to calculate a fair, transparent, and accurate transportation cost index. (D) Exclusions The transportation cost index shall not include costs associated with, as determined by the Secretary— (i) take-or-pay contract penalties; (ii) liquidated damages; (iii) the speculative aspects of transportation transactions; or (iv) any other costs that are not directly associated with moving Federal coal from 1 location to another location. (E) Publication Not less than twice annually, the Secretary shall publish the transportation cost index, along with a methodological description, including— (i) the method of calculation; (ii) the data used to calculate the transportation cost index, in an aggregate manner that does not reveal proprietary information; and (iii) any other information the Secretary considers to be appropriate to ensure transparency. (F) Other information If a person believes that the transportation cost index significantly deviates from the transportation costs of the person, the person may petition the Secretary to use information supplied by the person (other than costs descried in subparagraph (D)) in lieu of the transportation cost index, including all information the Secretary requires to accurately determine cost and audit the records of the person. (8) Reviews (A) In general To ensure a transparent, fair, and efficient administration of the Federal coal program, and to ensure that citizens of the United States receive a fair return on Federal coal, not later than 3 years after the date of enactment of this subsection and every 3 years thereafter during the 15-year period beginning on that date of enactment, the Comptroller General of the United States shall submit to Congress a report that describes a review of the Federal coal program, including the administration of this subsection. (B) Consultation In conducting a review under this paragraph, the Comptroller General shall consult with— (i) the Secretary; (ii) the Director of the Bureau of Land Management; (iii) the Secretary of Transportation; and (iv) the Secretary of Energy. (C) Inclusions A review under this paragraph shall include a review of— (i) the total volume of coal production from Federal land; (ii) the total volume of remaining coal reserves on Federal land; (iii) the total revenues generated from the Federal coal program, itemized by type of revenue, including lease bonus payments and royalties; (iv) market prices for coal; (v) market prices for transportation costs and any other deductible costs; and (vi) the appropriateness of royalty rates. (D) Format The Comptroller General shall report information in a review under this paragraph— (i) in the aggregate for the United States; and (ii) categorized by State for at least the top 10 Federal coal-producing States, as determined by the Comptroller General. (9) Application This subsection— (A) applies to coal mined from Federal land; and (B) does not apply to coal mined from tribal land. .