Markey introduces bill to toughen, and temporarily halt, federal coal leasing

Sen. Edward J. Markey, D-Mass., said May 15 that he has introduced the Coal Oversight and Leasing (COAL) Reform Act (S. 1340), which he claimed will modernize the program to protect taxpayers and end non-competitive leasing practices and other weaknesses in the leasing program.

Recent investigations of the federal coal program, including a Government Accountability Act (GAO) report released by Markey and a review by the Department of Interior Inspector General (IG), have found numerous deficiencies in the federal coal program, Markey said. Many of these problems have persisted since the 1980s, such as a lack of competition for federal coal leases. It is unclear whether American taxpayers are receiving a proper return on the more than 400 million tons of coal produced from federal lands each year worth billions of dollars, he said.

Notable is that often overlooked by environmentalists like Markey is that most federal coal leasing is of so-called “maintenance” tracts, which are additional reserves for existing mines. Unless another coal operator has a nearby mine that could also tap this reserve, which is rarely the case, there is no incentive for a competing bid for that lease to be filed. Maintenance tracts are usually so small that they don’t justify the development of a brand-new mine on just that property.

“The federal coal program is rife with sweetheart deals, outdated regulations and mine-sized loopholes,” said Markey, a member of the Senate Environment and Public Works Committee. “While the Interior Department has taken some steps to address the coal leasing process, we need comprehensive reform to ensure taxpayers receive a fair return on the sale of these publicly owned resources and the agency has the authority to ensure coal mining companies are following the law. Until reforms are put in place, American taxpayers will continue to pay the price and we will undercut the administration’s historic climate goals by subsidizing the extraction, export and burning of this federal coal.”

The bill would:

  • Put in place a temporary moratorium on new coal lease sales until the “proper reforms” have been put in place;
  • Eliminate a “loophole” that allows coal companies in certain cases to avoid paying the upfront cost that coal companies pay for the right to lease federal coal, also known as bonus bids;
  • Help determine the Fair Market Value (FMV) of coal leases by ensuring coal companies certify the accuracy of exploration data and that DOI consider independently verifying the data provided by industry. Interior’s Bureau of Land Management establishes FMV before lease auctions, and sometimes rejects lease bids for not meeting this secret valuation, forcing another auction a few months later;
  • Reform the FMV process by ensuring that no lease sale is conducted until DOI has completed a FMV analysis that fully accounts for the export potential of public coal, and prevents DOI from accepting minimum bids that are below the FMV;
  • Make the coal leasing process more transparent by requiring DOI to make public versions of appraisal reports and to put information on lease sales, high bids, royalty payments and revenue on its website so that it is accessible by the public;
  • Address tremendous lack of competition for federal coal lease sales by requiring the Secretary of the Interior to create a coal leasing plan, modeled after the offshore oil and gas leasing plan, to maximize competition for coal leases and the financial return for taxpayers and consider the impacts of coal leasing, production and development on climate change and the environment. Environmental groups like WildEarth Guardians have tried for years, without success, to get federal courts to impose a climate-change benchmark for coal leasing. That, depending on the climate-change benchmark set, could shut down federal coal leasing all by itself;
  • Increase the “outdated” minimum rental rate for coal leases;
  • Require the Bureau of Land Management to issue regulations to ensure consistent inspection and enforcement of coal mining operations; and
  • Increase enforcement capacity by allowing DOI to issue civil penalties to ensure that coal companies follow the law.

Last year, Senator Markey released a report prepared by the GAO that examined the federal coal program. Among other deficiencies, the GAO found that the vast majority of coal lease sales on public lands are not competitive. Roughly 90% of lease sales receive bids from only a single coal company and the vast majority of those opening bids from a single company – 83% – are accepted by DOI. The GAO review of the federal coal program requested by Senator Markey was the first since 1994, and the problems with federal lease sales stretch back into the 1980s.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.