By Patrick Rucker
WASHINGTON (Reuters) - The Obama administration has rejected a plea by billionaire investor William Koch to refund as much as $14 million in royalties on a now-shut Colorado mine, according to a letter explaining the decision.
The Interior Department last week ruled that Oxbow Mining, a subsidiary of Koch-controlled Oxbow Carbon LLC, is not entitled to a 'royalty rate reduction' since the move would do nothing to return the mine to life.
Reducing royalty rates has been a tool used by the federal government for decades when maximizing coal production was part of a national energy policy.
Oxbow closed its Elk Creek site in western Colorado two years ago after setbacks such as a fire and partial collapse made working the underground mine too costly, according to the company and regulatory paperwork.
Oxbow has said it has no plans to reopen the facility, which once employed more than 200 people. Machinery is being sold for scrap and the mine is ready to be sealed, according to regulatory paperwork.
"These circumstances indicate that a royalty rate reduction will not expand recovery or promote further development of the leases," the Interior Department's Bureau of Land Management wrote last week in a letter made public on Monday.
'Royalty rate reduction' and other such programs meant to promote coal production on public lands are now under scrutiny since President Barack Obama has vowed to curb the nation's reliance on fossil fuels, which contribute to global warming.
William Koch was an heir to the Fred C. Koch family fortune, and two of his brothers, Charles and David, are leading figures in conservative politics.
While William Koch is not as politically prominent as his brothers, he has been a significant political donor to conservative causes in the past.
A spokesman for Koch and Oxbow did not immediately respond to a call for comment.
Rocky Mountain coal has been valued at $35 a ton or more in the last several years, according to a Reuters review of Energy Information Administration data.
Because the BLM recommends a royalty rate reduction on 13.1 million tons of coal, the decision positions Oxbow to receive at least a $14 million refund on fuel mined since 2012, according to a Reuters calculation.