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American Coal Council calls administration report on coal-leasing program flawed

The American Coal Council has blasted a report by the WhiteHouse Council of Economic Advisors for failing to properly analyze marketcompetition in a larger sense.

The CEA released a report in June that the current federal coalleasing program and proposed an increase in royalties.

But the ACC's comments slam the report, saying the economicmodels it employed are flawed.

"The conclusions reached by CEA in arriving at itsanswer show a complete disconnect between its theoretical modeling results andthe way the real-world coal marketplace functions," the comments read.

Specifically, the ACC comments point to the CEA's conclusionthat increasing the royalty payments coal producers pay on coal under federalleases would increase the market price of coal around the country.

"The artificially lowprice of PRB coal exerts downward pressure on nationwide coal prices as the gapbetween PRB coal prices and coal prices elsewhere in the nation has increased.This gap has even put downward pressure on production of Appalachian and othernon-federal coal," the CEA report states.

The ACC, however, says the CEA conclusion is "incorrect"and "demonstrates a failure to appropriately analyze the competitivemarket forces at play in the various coal-producing regions of the UnitedStates, as well as the broader energy marketplace in America,"particularly due to the failure to take competition with natural gas intoaccount.

As coal plants continue to be shut down, the comments said,the demand for the commodity will continue to drop and demand for natural gaswill increase as new gas plants are built to replace coal plants.

"These conditions will lead to higher natural gasprices and coal will be less available to buffer higher gas prices and gasprice spikes."

The ACC said that "extreme market and regulatorypressures" already affecting the coal industry would only be exacerbatedby changing the royalty rate structure.

"It would be a grave mistake for American consumers andtaxpayers to believe that increasing royalty rates under the federal coalprogram will be beneficial for them," the comments read.

Regarding the environmental concerns raised by coalopponents, the ACC noted that coal leases already go through"multi-layered review prior to approval," and that climate effectswere already part of the National Environmental Policy Act process.

The ACC is not the only entity to take issue with the CEAreport. Republican senators called the report "prejudiced" and"compromised" in a recent letter to Interior Secretary Sally Jewell.