The lawmakers who lead the Senate Energy and Natural Resources Committee want officials to find out whether miners are short-changing taxpayers when they tap the coal-rich Powder River Basin in eastern Montana and Wyoming.

The basin is mainly federal land and so taxpayers are due a share of those sales.

Any wrongdoing by the mining companies must be found out and punished, the lawmakers said in their letter, which was sent on Friday.

"If any violations of the law have occurred, companies should be required to cure any gap in royalty payments and, if misconduct has occurred, civil penalties should be levied," reads the joint letter from Democratic Senator Ron Wyden, the incoming committee chairman, and the panel's leading Republican, Senator Lisa Murkowski.

A spokesman for the Interior Department said that officials aimed to answer the senators' questions and tighten controls on coal royalties.

"The Department is committed to collecting every dollar due per provisions of existing law," said Patrick Etchart, a spokesman for the Office of Natural Resources Revenue within the Interior Department.

CHEAP DOMESTIC POWER

Powder River Basin coal, which supplies about 40 percent of U.S. demand, has typically gone to feed domestic power plants, and policymakers never considered Asian sales when they conceived royalty rules, Reuters reported in October.

The coal policies meant to keep domestic power cheap and abundant are now padding the bottom lines of companies such as Arch Coal Inc, Peabody Energy Corp and Cloud Peak Energy Corp at the expense of taxpayers, Reuters reported last month.

Arch Coal and Cloud Peak Energy declined comment. A spokesman for Peabody Energy said the company abides by existing royalty rules.

"The way that royalties are assessed is appropriate, and we remain compliant with the regulations," said Vic Svec of Peabody.

The senators cited Reuters reporting when they warned that coal miners may be selling to sister companies at artificially low prices to dodge royalty payouts.

Congress' investigative arm, the Government Accountability Office, has for months been examining the federal coal program. The Department of the Interior also has an open investigation.

"This is so obvious it shouldn't need to be said: Coal companies need to be paying taxpayers all of the money they are owed," Wyden said in a statement. "If regulators, or decades-old laws, are not doing enough to protect the public interest, our committee intends to find out, and to fix it."

Murkowski, a supporter of free energy trade, said she expects officials to protect taxpayers' stake in sales from federal land.

"Energy exports can create jobs, generate revenue, and improve our balance of trade," Murkowski said in a statement. "As we seek to maximize these benefits, we must be certain that coal exporters are following the rules."

The lawmakers noted that 118 million tons of coal have been exported from Western states since 2001. They urged officials to audit those years and look for abuses.

On the New York Stock Exchange, Cloud Peak Energy closed up 0.8 percent at $19.46 per share, Arch Coal was up 4.5 percent at $7.66 and Peabody Energy was up 2.3 percent at $27.24.

NATURAL GAS PRECEDENT?

While the industry says it is acting aboveboard, outside lawyers point to a natural gas precedent that they say indicates the issue is far from settled.

In the late 1970s, Marathon Oil Corp used a similar accounting system for royalties on natural gas that was produced in Alaska but sold to Japan.

A federal court eventually told Marathon to pay out royalties based on the overseas value. Officials fined Marathon $10 million.

Peter Appel, a former Justice Department attorney, said the case shows that officials expect taxpayers to get a taste of the true gains on exported fuel but that the matter should remain a civil, not a criminal, case.

"This seems to fall pretty squarely in the civil arena," said Appel, who prosecuted cases for the Justice Department's Environment and Natural Resources Division and teaches at the University of Georgia School of Law.

(Reporting by Patrick Rucker; Editing by Andrea Ricci, Phil Berlowitz, M.D. Golan and Lisa Shumaker)

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