A united Utah congressional delegation and a representative of Gov. Norman Bangerter on Tuesday urged Interior Secretary Manuel Lujan to reduce the royalty rate for underground-mined coal from 8 percent to 5 percent.
The Utahns argued that underground coal mined in Utah is at a disadvantage when competing with strip-mined coal, and that it thus should pay the lower rate. The U.S. 10th Circuit Court ruled last year that the interior secretary is required to readjust royalties "if conditions warrant."Sen Orrin Hatch, R-Utah, said Lujan indicated he would make a decision fairly quickly. Hatch added that reducing the underground royalty would make Utah coal more competitive in U.S. and world markets.
James L. Van Laren, president of Coastal States Energy Co., predicted after the meeting that Utah coal output could be doubled or tripled within three or four years after the royalty was reduced.
Since coal royalties from federal leases are split between the federal and state coffers, Utah stands to lose as much as $7.5 million a year in royalty income if the rate is lowered.
Frank Davis, president of Utah Power and Light Co., who also attended the meeting, told reporters that the most immediate impact in Utah would probably be a reduction of about $5 million a year, or four-tenths of a percent, in electric bills.
Members of Utah's congressional delegation said UP&L and Coastal States had implied that the increase in volume of Utah coal they mined under lower royalties would more than make up the state's initial loss of revenue. Davis said UP&L would probably be able to sell its power out of state more competitively but stopped short of promising to make up the difference in state revenues.