The federal coal program must end or seriously reform
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Earlier this year, Secretary of the Interior Sally Jewell called for “an honest and open conversation about modernizing the federal government’s coal program.” Today I am speaking at the Washington D.C. coal listening session to start that conversation. To be honest and open about our climate reality is to acknowledge that the only “modern” coal leasing program is one that doesn’t lease coal at all, but keeps it in the ground.
This is the first of five listening sessions set up by the Bureau of Land Management within the Department of the Interior to seek information from the public about how the agency can best reform the Federal Coal Management Program to ensure that Americans receive a fair return on the coal reserves the federal government manages on their behalf.
The Bureau of Land Management is responsible for leasing publicly owned coal on public lands through competitive auctions at fair market value, and choose the best offer from multiple, qualified bidders. In practice, however, the coal lease sale process is non-competitive, and the system for valuing coal lacks transparency and is open to industry manipulation. Since 1990, only 10 percent of the 107 leased coal tracts on public lands had more than one bidder. Rental fees are only $3.00 per acre, and the royalty rate of 12.5 percent for surface mining and 8 percent for underground mining have not increased since 1920. In addition, royalty rates do not account for the social cost of carbon or the growing coal export market. The failure to auction coal leases for their fair market value equals a revenue loss of approximately $28.9 billion over the past 30 years.
Not only is the leasing process noncompetitive and unfair, it exacerbates climate disruption. With more than 57 percent of fossil fuel emissions from federal areas coming from the combustion of public coal, there is no place for the federal coal program in a carbon-constrained world. I am calling on the Department of the Interior to halt any further coal lease sales, at least until the following reforms are enacted:
- First, close existing royalty loopholes that allow coal companies to sell coal to themselves through subsidiaries at artificially low prices and then resell that coal on the export market for almost ten times its domestic value. This loophole results in an effective royalty rate of 4.9 percent, far below the minimum 12.5 percent required by law.
- Second, raise the royalty rate and other fees for publicly-owned coal to reflect their true social cost and return millions of dollars to state budgets to support schools, infrastructure and other important programs.
- Third, establish criteria to determine whether coal leases are in the public interest. The Department of the Interior has never denied a coal lease application, even though current sales require denial of leases that are contrary to the public interest. Public interest criteria should take into account current and future demand for coal, existing reserves and environmental and climate impacts.
- Fourth, use the social cost of carbon to evaluate the climate impacts of federal coal leases. If the social cost of carbon were incorporated into the lease price, the price should be as high as $62 per ton. By putting a fair and accurate price that reflects the true economic, environmental and social cost of publicly-owned coal, it would become clear that the only place for dirty fossil fuels like coal is to leave them in the ground.
- Fifth, update bonding requirements so that coal companies are held responsible for their mining activities that impact the health of workers and local communities, as well as the quality of the environment around their mines.
The federal coal program’s noncompetitive practices are unfair and need to stop. The Department of the Interior is giving away more than $1 billion every year to fossil fuel companies that are destroying our environment, spewing climate-disrupting emissions into the air, and threatening public health and wildlife. Leasing publicly-owned coal is counterproductive to the administration’s climate mitigation goals and contrary to the latest climate science, which tells us that at least 80 percent of fossil fuel reserves must remain in the ground to have a chance at avoiding irreversible climate catastrophe. The federal government should stop leasing public coal because we simply cannot afford it burn it in our carbon constrained world.