Interior to ‘pause’ new leasing of federal coal while review is undertaken

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 in order to ensure that it is properly structured to provide a fair return to taxpayers and reflect its impacts on the environment, while continuing to help meet our energy needs.

This is another step along the path that President Barack Obama announced earlier in the week in his State of the Union address to improve the way the government manages fossil fuel resources and move the country towards a clean energy economy.

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 (typically used in steel production), small lease modifications and emergency leasing, including where there is a demonstrated safety need or insufficient reserves.

Notable is that a huge percentage of production of federal coal comes in the Powder River Basin of Wyoming and Montana, where there is no metallurgical coal. Major producers in the Powder River Basin include Arch Coal (which is in bankruptcy protection), Peabody Energy, Alpha Natural Resources (in bankruptcy protection), Cloud Peak Energy and Westmoreland Coal.

In addition, pending leases that have already completed an environmental analysis under the National Environmental Policy Act and received a final Record of Decision or Decision Order by a federal agency under the existing regulations will be allowed to complete the final procedural steps to secure a lease or lease modification. During and after the pause, companies can continue to mine the large amount of coal reserves already under lease, estimated to be enough to sustain current levels of production from federal land for approximately 20 years, Interior said.

“Given serious concerns raised about the federal coal program, we’re taking the prudent step to hit pause on approving significant new leases so that decisions about those leases can benefit from the recommendations that come out of the review,” said Jewell. “During this time, companies can continue production activities on the large reserves of recoverable coal they have under lease, and we’ll make accommodations in the event of emergency circumstances to ensure this pause will have no material impact on the nation’s ability to meet its power generation needs. We are undertaking this effort with full consideration of the importance of maintaining reliable and affordable energy for American families and businesses, as well other federal programs and policies.”

This action builds on Jewell’s call last March for a conversation about modernizing the federal coal program, which led to a series of public listening sessions across the country in 2015.

Interior to also reveal more data related to federal coal

Jewell also announced that Interior will undertake a series of good government reforms to improve transparency and administration of the federal coal program. These reforms include establishing a publicly available database to account for the carbon emitted from fossil fuels developed on public lands, requiring U.S. Bureau of Land Management offices to publicly post online pending requests to lease coal or reduce royalties, and facilitating the capture of waste mine methane. BLM is the Interior agency that does the actual coal leasing, in some cases on behalf of the U.S. Forest Service.

These actions build on existing efforts to modernize the federal coal program, including the Office of Natural Resources Revenue’s work to finalize a proposed rule to ensure that the valuation process for federal and American Indian coal resources better reflects the changing energy industry while protecting taxpayers and American Indian assets.

The PEIS process will kick off with public sessions in early 2016 to help determine the precise scope of the review. Interior will release an interim report by the end of 2016 with conclusions from the scoping process about alternatives that will be evaluated and, as appropriate, any initial analytical results. The full review is expected to take approximately three years.

Environmental groups for years have been trying in federal court, so far without success, to tie federal coal leasing into the climate change debate, arguing that this coal when burned in power plants emits massive amounts of CO2. Jewell’s move will apparently do that.

Over the last few years, approximately 41% of U.S. annual coal production has come from federal land. Federal coal produced from the Powder River Basin in Montana and Wyoming accounts for over 85% of that federal coal production. Federal coal was used to generate about 14% of U.S. electricity in 2015.

As of Fiscal Year 2014, the BLM administered 310 federal coal leases, encompassing 475,692 acres in ten states, with an estimated 7.75 billion tons of recoverable federal coal reserves. Over the last decade, the BLM has held 39 coal lease sales and managed leases that produced approximately 4.4 billion tons of coal and $10.3 billion in revenue.

Reactions to this move break along the usual lines

Karen Harbert, president and CEO of the U.S. Chamber of Commerce‘s Institute for 21st Century Energy said Jan. 15 about this move by Interior: “Another day, another front on the war on coal from this administration. At this point, it is obvious that the President and his administration won’t be satisfied until coal is completely eradicated from our energy mix. Their foolish crusade takes away one of America’s greatest strengths—our diverse mix of energy sources.  If the President wants electricity rates to skyrocket—as he once said he did—he’s on the right path.”

National Mining Association (NMA) President and CEO Hal Quinn, who represents major coal producers, said Jan 15: “The Obama administration’s move to shut off the largest source of America’s lowest cost and most reliable fuel for electricity opens up another front in its ‘Beyond Jobs’ campaign. Under the guise of a listening tour last summer, administration officials came, sat, but never listened to the facts that every ton of coal produced from federal lands pays more than its fair share through bonus bids and above-market royalty rates. Instead, they heed the directives of their political benefactors who, to borrow a phrase from the president, are peddling fiction. The idea that future coal leasing requires a pause to evaluate environmental impacts defies credulity. Every federal coal lease sale and subsequent mining project must pass multiple levels and sequences of both federal and state evaluation. It is stunning that the administration believes a process that already pushes the development of coal projects beyond a decade needs more red tape and delays.”

U.S. Sen. Mike Enzi, R-Wyo., said: “Let’s call this what it is. It’s an economic assault on Wyoming and all those in America who work in or who are associated with an industry that supplies the largest share of our electricity. This isn’t some good government efficiency measure or about trying to deliver a ‘fair return to American taxpayers.’ That’s a sham. The president decided a long time ago he wanted to destroy the coal industry and this is about wanting to make coal more expensive and less accessible. This is nothing more than the latest tenet of what is sadly the most successful program of this president’s administration: the war on coal.”

Sierra Club Executive Director Michael Brune said in a Jan. 15 statement: “The Sierra Club applauds President Obama and Secretary Jewell for their leadership in reforming the federal coal leasing program and putting an immediate stop to all new and modified coal leasing. This program is broken, outdated, and does not consider the threat of climate change in our communities, and thanks to the Obama Administration’s leadership, we can proudly say that big coal’s destructive reach over our public lands is coming to an end.”

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.