Proposed changes to the way coal royalties are calculated are proving controversial, with coal companies coming out strongly against them and taxpayer advocacy groups saying they don't go far enough.

Companies mining coal on federal land are supposed to pay at least a 12.5 percent royalty to the government. The changes, proposed in December by the Office of Natural Resources Revenue, would close what some have called a loophole in coal royalty calculations that allows companies to pay royalties on the sale price to an affiliated company, which can then turn around and sell it for a higher price. 

According to data from the Energy Information Administration, almost half of coal in the Powder River Basin is sold to companies wholly or partially owned by the coal miner. Taxpayer advocacy groups like the Center for American Progress say that states are losing out on tens of millions of dollars as a result.

“What we are proposing is that royalties be based on the true market price of coal, and that is reflected at the final point of sale of this coal, and that would be either to a power plant or to an exporter,” says NidhiThakar, Deputy Director of the Public Lands Project at CAP. 

But Cloud Peak Energy, Wyoming’s largest coal company, says that would punish vertically integrated companies. Spokesman Rick Curtsinger writes in a statement that the new rules would actually decrease the overall royalties paid, by reducing the amount of coal being mined, saying they will “have a chilling effect on investment while adding to the large regulatory burden already faced by the industry.”

The 60-day public comment period for the rules opened Monday.