Basin Electric: Coal leasing moratorium shouldn’t have much impact – for now

Basin Electric Power Cooperative said Jan 22 that it may have been spared immediate effects of the U.S. Department of the Interior’s temporary moratorium on new leases for coal mined from federal lands, though many unknowns remain.

“This is a complicated issue because we won’t know the effect on the calculation of federal royalties for some time,” said Joe Leingang, Basin Electric director of fuel and transportation. “However, on its face, this is just more of this administration’s continuing war on coal.”

Looking at the situation for each state where Basin has a coal position:

North Dakota

Federal coal makes up about 20% of coal mined annually in North Dakota, according to Leingang. Basin Electric subsidiary Dakota Coal Co. controls rights to lignite reserves in North Dakota and provides financing for the Freedom Mine north of Beulah, N.D. The Freedom Mine is owned and operated by The Coteau Properties Co., a subsidiary of North American Coal Corp. Dakota Coal’s customers include Basin Electric’s Antelope Valley Station, Leland Olds Station and Dakota Gasification Co.’s Great Plains Synfuels Plant.

According to Leingang, most of Freedom Mine coal is in non-federal coal leases. “While this moratorium complicates mine planning at Freedom Mine we’re in generally good shape,” Leingang said. “Our bigger concern here is in the formulation of the royalty rates and outstanding or planned future requests for royalty reductions.”

Wyoming

The Western Fuels Association manages the Dry Fork Mine in the Powder River Basin, which is owned by Western Fuels-Wyoming. Dry Fork produces approximately 6 million tons of coal annually. Customers include Basin Electric’s Laramie River Station, Dry Fork Station and Leland Olds Station.

According to Leingang, nearly 300 million tons of coal reserves are already tied up in five federal coal leases at the Dry Fork Mine. “In general, Powder River Basin (PRB) coal producers have enough federal coal leased to continue mining at current levels for about another 20 years,” Leingang said. “We’re in pretty good shape.”

This moratorium, however, puts 10 PRB applications on hold for mine extensions from mines which Basin Electric purchases coal for Laramie River Station, Leingang said. He added that many pending coal lease applications have recently been “pulled” because the U.S. Bureau of Land Management (BLM), which administers the program for the Department of the Interior, has priced them “exorbitantly.”

Interior puts coal leasing on ‘pause’ during environmental review process

Interior Secretary Sally Jewell announced Jan. 15 that the Interior Department will launch a comprehensive review to identify and evaluate potential reforms to the federal coal leasing program. The programmatic review will examine concerns about the federal coal program that have been raised by the Government Accountability Office, the Interior Department’s Inspector General, members of Congress and the public. The review, in the form of a Programmatic Environmental Impact Statement (PEIS), will look at issues such as:

  • how, when, and where to lease;
  • how to account for the environmental and public health impacts of federal coal production; and
  • how to ensure American taxpayers are earning a fair return for the use of their public resources.

“Even as our nation transitions to cleaner energy sources, building on smart policies and progress already underway, we know that coal will continue to be an important domestic energy source in the years ahead,” said Jewell, who last year held listening sessions around the country on this issue. “We haven’t undertaken a comprehensive review of the program in more than 30 years, and we have an obligation to current and future generations to ensure the federal coal program delivers a fair return to American taxpayers and takes into account its impacts on climate change.”

Consistent with the practice during two programmatic reviews of the federal coal program that occurred during the 1970s and 1980s, Interior will also institute a “pause” on issuing new coal leases while the review is underway. The pause does not apply to existing coal production activities on federal lands. There will be limited exceptions to the pause, including for metallurgical coal, small lease modifications and emergency leasing, including where there is a demonstrated safety need or insufficient reserves.

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.