Coal Groups Slam DOI Plan to Reassess Federal Coal-Leasing Program

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The last time the U.S. Department of the Interior (DOI) (Washington, D.C.) conducted a comprehensive assessment of its federal coal-leasing program, Ronald Reagan was president, no one worried about global climate change and about 57% of all electricity was generated by coal. A lot has changed over the last 30 years: coal's share of the electricity fuel mix has fallen sharply, to about 39%; global climate change is driving numerous federal energy and environmental policy initiatives; and President Obama, in the last year of his presidency, is seeking to burnish his environmental legacy.

That's why DOI's Bureau of Land Management (BLM) (Washington, D.C.) is conducting another review of its coal-leasing program, including an assessment of whether and how that program contributes to global climate change. While it conducts its assessment, the agency said it will institute a temporary "pause" in approving new mines. DOI's move, announced January 15, came only days after President Obama's final State of the Union address, where he pledged to "push to change the way we manage our oil and coal resources so that they better reflect the costs they impose on taxpayers and our planet."

BLM's reassessment couldn't come at a worse time for the coal industry, where demand is at a 30-year low, leading to widespread mine closures, bankruptcies, asset sales, stock price collapses and reduced capital outlays. In November, Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) and Arch Coal (OTCMKTS:ACIIQ) (St. Louis, Missouri)--two of the largest U.S. coal mining companies--reportedly withdrew applications to lease almost 2 billion tons of coal in Wyoming. Other companies are said to have asked federal officials to delay sales on three leases totaling 668 million tons.

Peabody's stock has fallen about 99% over the last five years, to about $2.50. Arch's stock has fared even worse, dropping to about 50 cents a share. Two other large coal companies--Alpha Natural Resources Incorporated (OTCMKTS:ANRZQ) (Bristol, Virginia) and Patriot Coal Corporation (St. Louis, Missouri)--recently filed for bankruptcy.

Stuart Sanderson, president of the Colorado Mining Association (CMA) (Denver, Colorado), blasted the BLM proposal. In a statement, he said: "the administration already is regulating utility carbon emissions through the Clean Power Plan. Thus, it is inappropriate to regulate [carbon] emissions through [coal] leasing. Far from a temporary 'pause,' the announcement has longstanding implications for the future of coal mining on the millions of acres of federal lands throughout Colorado and the West." CMA members mined over 21 million tons of coal in 2015.

Hal Quinn, president of the National Mining Association (NMA) (Washington, D.C.), also lashed out at the administration's plans. "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 fact 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," Quinn continued. "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."

In announcing its reassessment decision January 15, DOI said its review will examine concerns about the federal coal-leasing program that have been raised by the Government Accountability Office (GAO), the DOI's Inspector General, members of Congress and the public. The agency said its review, in the form of a Programmatic Environmental Impact Statement (PEIS), "will take a careful 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," Secretary of the Interior Sally Jewell said in a statement announcing the reassessment. "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."

While it conducts its review, DOI said it will "institute a pause on issuing new coal leases." The pause will not affect existing coal production activities. The agency said there would be "limited, commonsense 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. 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."

BLM's review also will include steps to "improve transparency and administration of the federal coal program," including establishing a publicly available database to account for the carbon emitted from fossil fuels developed on public lands, facilitating the capture of waste mine methane and requiring agency offices to publicly post online pending requests to lease coal or reduce royalties.

The agency projected an interim report on its assessment will be issued by the end of 2016. Throughout the year, it will hold public hearings to solicit stakeholder input. DOI estimated current production could continue for at least 20 years at current levels from existing leases. BLM is responsible for leasing land for coal mining on about 570 million acres across the country. Last March, Secretary Jewell called for "an open and honest conversation about modernizing the federal coal program," which led to a series of public listening sessions across the country.

"DOI's plan to comprehensively reassess its coal-leasing program is the very definition of kicking an industry when it is down," commented Joe Govreau, Industrial Info's vice president of research for the Metals & Minerals Industry. "Between mine closures, bankruptcies, asset sales and cutbacks in capital spending, this industry is on the ropes. Coal has long provided U.S. homes and businesses with a stable, reliable and affordable source of electricity, but it has a dim outlook in the future electric fuel mix."

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