Press release: Federal report says ‘weaknesses’ in coal-leasing program cost taxpayers millions – June 11, 2013

June 11, 2013

Categories: Coal, Congress, News, Northern Plains Resource Council

Northern Plains Resource Council

WASHINGTON, D.C. – U.S. taxpayers are likely losing tens of millions of dollars on bids from mining corporations as a result of a federal leasing program that undervalues the price of coal taken from public lands in the Powder River Basin of Montana and Wyoming, according to findings from an investigation by the Department of Interior’s Inspector General.

Coal leases in the West are administered by the Interior Department’s Bureau of Land Management, but even though the agency has “a legal obligation to the American public to secure a fair market value for coal” it is not meeting up to its responsibilities to taxpayers.

The IG’s investigation, which was released earlier today, does not try to estimate the full scope of coal losses resulting from undervalued leases, but rather points to policy “weaknesses” and “flaws” that compound into substantial costs to taxpayers. As an example, it points to several recent mining leases in the Powder River Basin alone where missteps in the valuation process cost taxpayers at least $62 million.

“The Inspector General report underscores the need for comprehensive federal coal leasing reform,” said Ellen Pfister, a member of Northern Plains Resource Council and rancher in the Bull Mountains whose land is affected by underground coal mining. “The Department of the Interior should hold off on leasing additional Powder River Basin coal until we can be sure taxpayers are getting a fair deal.”

“The system is completely broken and until it gets fixed, taxpayers are going to be cheated again and again out of millions of dollars,” said L.J. Turner, a Wyoming rancher and member of the Powder River Basin Resource Council who grazes cattle near the largest coal mines in area.

The Powder River Basin, which stretches across southeastern Montana and northeastern Wyoming, currently produces 44 percent of the coal mined in the nation.

According to the IG report, BLM officials regularly low-ball the value of coal, allowing mining companies to pay far lower than market value for what they mine and sell. Even errors that undervalue coal by as little as a penny a ton can add up to multi-million dollar losses for taxpayers because of the enormous size of tracts that are leased at auction, the report concluded. There are currently close to 4 billion tons of Powder River Basin coal in the pipeline for possible coal leases, according to BLM data.

An independent economic analysis on the federal coal leasing program conducted last year found that as a result of these policies that are highly favorable to the coal mining industry, taxpayers over the past 30 years have cumulatively lost almost $30 billion in revenue. That report raised a number of questions that led the IG to undertake its investigation.

Mining corporations such as Arch Coal, Peabody Energy and Cloud Peak Energy have argued that allowing them to pay less than fair market value for coal from public lands benefits Americans because it keeps coal cheap, which helps keep down prices for electricity. Since 2001, however, coal’s share of the electricity market has fallen from roughly 50% to around 40% today as utilities switch to energy sources such as natural gas, wind and even solar that are outcompeting it.

As a result, mining companies are looking for new markets for their coal overseas. But as the inspector general report noted, the BLM is not fully accounting for the added value of coal that is intended for export, especially to Asian markets. Coal exports more than doubled in the U.S. to 125 million tons between 2007 and 2012. But even though the price paid to companies for that coal also doubled, the price they paid for leases does not reflect the dramatic increase in fair market value.

“The Interior Department has an obligation to the American people to make sure they’re getting fair value for this coal,” said Turner. “Secretary Jewell should put the brakes on any additional leases until the DOI can ensure that taxpayers aren’t getting cheated any more.”

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