Guest opinion: Taxpayers lose, mining firms gain under flawed coal leasing – Billings Gazette, March 20, 2014

March 20, 2014

Categories: Coal, Congress, News

By Walter Archer

Two recent congressional investigations point to the loss of millions of dollars to the public due to flaws in the way the Bureau of Land Management manages federal coal, including large holdings in the Powder River Basin of Montana and Wyoming.

As a lifelong resident of the region, this matters to me for multiple reasons, including the fact that local and state governments are short-changed when the BLM gives away public coal at below market value.

The Government Accountability Office issued a report after an 18-month study. The problems identified in the report were subsequently amplified by the release of details from an earlier study by the Interior Department Office of Inspector General. The conclusions of congressional overseers based on the GAO and OIG findings indicate that taxpayers are being shorted millions, perhaps billions, due to the mishandling of the sales. From the public standpoint BLM’s process prevents transparency and accountability that Montanans expect from officials. Even now, after years of effort and congressional requests for information, many details have been withheld from public scrutiny on how federal assets are handled in the BLM coal program.

The GAO report clearly concludes that:

– Competition for coal leases is still lacking (90 percent of sales are to a single bidder).

– Absent competition, the Department of Interior lacks rigor and oversight in determining the fair market value of federal coal leases.

– Interior is not fully considering the potential of coal exports despite market changes.

– BLM operates behind a veil of secrecy. DOI fails to exercise internal audits and oversight and provides limited information to the public.

Sen. Ed Markey, D-Mass., who had access to the suppressed portions of the GAO study, has called on Secretary of Interior Sally Jewell to suspend further leasing until the program can be fixed. He notes that based on just a handful of leases studied, taxpayers lost $200 million or more. Hearkening back to the findings of the DOI inspector general’s study in June, 2013, a mere one penny undervaluation in a coal lease sale costs the taxpayer, on average, $3 million. Markey points out that on a large lease, one penny translates to a $7 million loss to the public.

Following the GAO report, Sen. Ron Wyden, D-Ore., released results of his follow-up questions to DOI’s Office of Inspector General on its earlier investigation. Wyden’s questions revealed that out of a sample of 15 leases looked at, BLM executed leases in four instances below the fair market value determined by its own team. The Inspector General also objected to two recent leases amounting to 780 million tons of coal, for a price for that was below recent comparable sales. When there is only one bidder, comparable sales are key in determining whether the value of the bid is adequate.

Another Wyden finding is that since 1991 one employee in the BLM Wyoming office has been responsible for setting the value on $4.9 billion worth of coal leases covering an estimated 8 billion tons of coal, with no independent audits of these decisions.

These findings point to the need for Secretary Jewell to put the brakes on federal coal leases until the deep and pervasive problems can be thoroughly analyzed and reforms put in place to be good stewards of the public’s assets.

Walter Archer ranches at Olive, Mont., and is a member of the Western Organization of Resource Councils.

220 South 27th Street, Suite A
Billings, Montana 59101
(406) 248-1154