Feds Release Long-Awaited Roadmap for Coal Program Overhaul

Interior Secretary Sally Jewell today laid out plans for long-overdue overhaul of the broken federal coal program, including steps to address climate change and fix a process that has short-changed taxpayers more than $30 billion over the last three decades.

Currently, 40 percent of coal burned in the US comes from federal lands, accounting for 10 percent of US carbon pollution. Importantly, the report lays out one scenario for no new coal leasing on federal lands.

Such a move would mean aligning the use of America's public lands with our obligation to protect future generations from the dangers of climate change—that's what leadership is all about, at home and abroad—as we transition away from dirty fossil fuels of the past to a clean energy 21st century.

President-Elect Trump has said he plans to stop efforts modernize the coal program. That’s not leadership, and it’s not realistic. The report and many market analysts have repeatedly pointed out that the coal industry is in structural decline.

What’s more, the Department of Interior’s (DOI) own Inspector General along with the Government Accountability Office found the program—which hasn’t been updated or audited in 30 years—to be deeply flawed.

The report notes that “while energy markets, communities, environmental conditions and national priorities have undergone major changes in recent decades, the BLM’s (Bureau of Land Management) management of the federal coal program has stayed relatively static.”

There have been previous attempts to fix the program, and they’ve been bipartisan, the current pause on substantial new leasing (until an overhaul) is not the first. Moratorium’s have been placed on the federal coal leasing program twice before, by President’s Richard Nixon, and Ronald Reagan, for much the same reasons.

Independent audits have shown the program has short-changed the taxpayers at least $30 billion over the last three decades by selling coal to companies below the required “fair market value.” For example, experts calculated that American taxpayers lost out on over $1.2 billion from the largest coal lease sale in BLM history in 2012. Revenues from lease sales are split 50-50 with states.

Today’s report lays out a series of much needed changes to the federal coal leasing program. They include charging a higher royalty rate to companies who mine the coal (and have been using loopholes to avoid proper costs), including a ‘carbon adder’ or charge to each ton of coal mined, and setting an overall carbon budget for emissions from federal coal. More broadly they cover three key areas: ensuring a fair return to Americans for the sale of their public coal resources, assessing the structure and efficiency of the coal program in light of current market conditions, and considering impacts on communities and the environment including climate change.

“Based on the thoughtful input we received through this extensive review, there is a need to modernize the federal coal program,” Jewell said today. “We have a responsibility to ensure the public—including state governments—get a fair return from the sale of America's coal, operate the program efficiently and in a way that meets the needs of our neighbors in coal communities, and minimize the impact coal production has on the planet that our children and grandchildren will inherit. The only responsible next step is to undertake further review and implement these commonsense measures.”

The report states unequivocally that “climate change impacts touch nearly every aspect of public welfare,” and recommends requiring new compensation to offset climate and resource impacts.

It was released by the agency charged with managing the coal program, the Bureau of Land Management (BLM) as part of the larger Programmatic Environmental Impact Statement (PEIS) process to overhaul the coal program. Traditionally in these processes, the next step is for the BLM to prepare a draft PEIS based largely on the parameters and recommendations set out in the Scoping Report. Currently, there is a pause on new federal coal lease sales until the overhaul can be completed.

Secretary Jewell noted in a talk today at Columbia University that the program is using outdated regulations, and that even industry has complained that the process is overly opaque and antiquated, increasing their costs.

Her agency says the report set out "the best policy ideas available" for addressing the key issues of taxpayer return and climate change. These include raising royalty rates. The royalty rate companies pay to taxpayers is supposed to be 12.5 percent, but using these loopholes and deductions companies have only been paying an effective rate of 4.9 percent. Raising rates follows key findings from the White House’s Council of Economic Advisors.

The report also lays out a scenario for diverting a portion of federal coal revenue to help coal communities, and calls for developing strategic leasing plans to generate more competition at leasing auctions.

But again, perhaps most importantly, the report lays out a “no-leasing” alternative. Adopting that alternative would align the use of America's public lands with our obligation to protect them for future generations.

That’s an obligation bigger than people or politics, and it’s one the Trump Administration will neglect at its peril.

About the Authors

Theo Spencer

Senior Advocate

Join Us