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Published on Wednesday, April 23, 2008. Last modified on 4/23/2008 at 12:50 am

BLM accepts higher coal bid

By DUSTIN BLEIZEFFER Casper Star-Tribune

CASPER - After what federal regulators rejected as a "below-market" bid in the fall, the Bureau of Land Management has accepted a higher bid from Cordero Mining Co. for coal in the Powder River Basin.

On Tuesday, Cordero Mining Co. - a subsidiary of Rio Tinto Energy America - was the single bidder on the 2,900-acre South Maysdorf coal tract located in central Campbell County. The lease contains an estimated 288.1 million tons of "minable" coal, according to the BLM.

Cordero's bid of $250.8 million is 87 cents per ton. That compares to Cordero's earlier bid of $121.9 million, or just more than 42 cents per ton, according BLM reports.

"We are very pleased with the successful acquisition of this lease-by-application for Cordero Rojo Mine," Cordero Rojo Mine general manager Joe Vaccari said in a prepared statement. "This lease represents almost 300 million tons of additional coal reserves that will benefit our future development plans and help supply the substantial demand for Powder River Basin coal."

The BLM also rejected Cordero's bid for the "North Maysdorf" coal tract in October. The company bid just more than $21 million for the 54.7 million-ton tract, or just more than 38 cents per ton.

About 4 billion tons of federal coal reserves in Wyoming have been nominated for leasing. That volume, and possibly more nominations, are expected to go to competitive bid by 2012, according to the BLM.

Competing interest for the 327 million-ton West Roundup lease in 2005 brought a record bid of 97 cents per ton from Peabody Energy, shattering the previous high of 92 cents per ton, according to the BLM.

Coal royalties in Wyoming topped $398 million in 2007. The money is split 50-50 between the federal government and the state.

Severance taxes, federal mineral royalties and coal lease bonus bid payments from the coal industry exceed $600 million annually, according to the state's economic analysis division. That doesn't include sales and use taxes, secondary business or the more than $600 million in annual payroll.

Other tax revenues come when the coal is actually mined. The county ad valorem tax is about 6 percent, and the severance tax is 7 percent. Those are based on the assessed value of the coal, not the actual sale price, according to the Wyoming Mining Association.

Powder River Basin coal is selling on the spot market for $14-plus per ton. Additionally, there is a federal mineral royalty tax of 12 percent based on the sale price of the coal. Half of that money comes back to the state as well. Mines also pay 35 cents per ton to the federal Abandoned Mine Lands Fund, half of which supposed to come back to Wyoming.