Energy Daily, "Coal Industry Sees Trouble With MMS Royalty Plan"
(#30027)                        

May 24, 1993


Letters to the Editor (#30027)
Energy Daily
627 National Press Building
Suite 627
Washington, DC  20045
Fax: 202-662-9744

Dear Editor:

     Your story in the May 12 Energy Daily, "Coal Industry Sees
Trouble With MMS Royalty Plan," leaves the impression that under
the MMS contract settlement policy, the coal industry is being
treated differently from the way it has been in the recent past. 
We appreciate the opportunity to correct the record.

     Federal lessees, whether they produce coal, gas or any other
leasable mineral, owe royalties on production.  Coal companies
that operate on federal lands may owe royalties on negotiated
contract settlements if production to which the settlement is
attributable occurs after a contract settlement.  That has been
the case, and it remains so today.  For coal, that was true in
1989, and it is true in 1993.

     The 1989 preamble of the rule on coal valuation on federal
leases clearly states that "'Settlement' payments made to
terminate a sales contract before the contractually-specified
termination date will usually not be considered payment for
produced coal."  The words "usually not" allow for instances
where there are coal contract settlement cases where royalties
would be due the federal government.  

     The preamble goes on to say: "If there is a follow-on
contract, MMS will review the circumstances to determine if some
or all of the payment is royalty bearing."

     Finally, the rulemaking is not required because this does
not represent a change in policy.  The Secretary of the
Interior's February 10, 1993, memo underscores this point
stating, "... that the MMS policy actually implements existing
Departmental regulation and practice, and does not involve any
change in policy ...."

     We hope this explanation will allay any concerns.  MMS is
anxious to work with the coal industry and is meeting with key
representatives to further clarify contract settlement issues.
                         Sincerely,

                         Jim Shaw
                         Associate Director, 
                         Royalty Management Program
                         Minerals Management Service 
                         U.S. Department of the Interior
                         

                          -- MMS-RMP --