How Much Does Trump Dig Coal? DOI Plans to Modernize Coal-Lease Program May be an Early Test

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--During his campaign for president, Donald Trump repeatedly vowed to slash "job-killing regulations" and restore Coal Country to its glory days. In campaign speeches delivered in Coal Country, signs proclaiming "Trump Digs Coal" were prominently and enthusiastically waved.

The world will soon see the degree to which Donald Trump, as president, still digs coal.

On Wednesday, nine days before the start of the Trump administration, the Bureau of Land Management (BLM) (Washington, D.C.), a division of the U.S. Department of the Interior (DOI) (Washington, D.C.), released the results of its two-year listening campaign on the federal coal-leasing program. The two-volume, 1,378-page report, characterized as a programmatic environmental impact statement/scoping report, forms the rationale for BLM's efforts to update the leasing program, the terms of which have not changed in about 30 years.

For example, that program levies a 12.5% royalty rate on coal extracted from surface mines (8% for underground mines). By contrast, Oil & Gas producers pay an 18.75% royalty rate for hydrocarbons extracted from offshore wells. The federal coal-leasing program also charges a $3 per acre royalty fee and requires bidders for new leases to pay a minimum of $100 per acre of land. The terms of the coal-leasing program have not changed since the start of Ronald Reagan's second presidential term.

The agency said its modernization effort would include "adjusting rental rates and bonus bids paid for leased coal to reflect inflation; strengthening financial and environmental responsibility requirements for operators who are permitted to bid on coal leases; and undertaking actions to improve lease process efficiency."

Coal-industry sources were sharply critical of the BLM's move, which the incoming Trump administration is free to overturn. The incoming Trump administration's choice to lead the DOI, Montana Congressman Ryan Zinke, has supported legislation to lift the coal-leasing moratorium on federal and tribal lands. In his energy plan, Trump pledged to lift the moratorium on new coal leases. Efforts to reach the Trump transition team for a comment on the BLM plans were unsuccessful.

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In a January 11 statement, DOI Secretary Sally Jewell said the coal-leasing program needed to be "modernized" to ensure it provided "a fair return to taxpayers." She added the update also would consider the impact coal mining would have on climate change, and that the coal-leasing program needed to be operated with greater transparency and efficiency.

BLM concluded the coal-leasing program needed to be revamped based on comments it received during a public outreach effort. New coal leases were suspended last January after BLM decided it needed to take the public's pulse on the coal lease program. Eventually, more than 200,000 public comments were received. During 2016, the BLM gathered public comments in meetings held in Casper, Wyoming; Salt Lake City, Utah; Knoxville, Tennessee; Grand Junction, Colorado; Seattle, Washington; and Pittsburgh, Pennsylvania. For more on BLM's decision to halt new coal leases, and the coal industry's response, see February 16, 2016, article - Coal Groups Slam DOI Plan to Reassess Federal Coal-Leasing Program.

"Federal land coal-leasing reform and lifting of the moratorium would be good first steps in redefining coal's place in future U.S. energy policy," said Joseph Govreau, Industrial Info's vice president of research for the Metals & Minerals Industry.

Shortly after last January's announcement came Secretarial Order 3338, which directed the BLM to prepare a Programmatic Environmental Impact Statement (PEIS) under the National Environmental Policy Act (NEPA) to identify and analyze potential leasing and management reforms for the Federal coal program.

The BLM manages the federal coal-leasing program on approximately 570 million acres of federal land where coal is mined. BLM said it administers 306 coal leases encompassing more than 475,000 acres of land in 10 states, which contain an estimated 7.4 billion tons of recoverable coal. Over the last decade, BLM-administered leases have produced more than 4 billion tons of coal, resulting in the collection of more than $10 billion in federal revenue that is shared with the state from which the mineral was mined.

In 2015, BLM said 42% of all coal produced in the U.S. came from federal lands, mainly the Powder River Basin of Wyoming and Montana. But as the use of coal to generate electricity has fallen in recent years, coal production also has fallen. Coal-fired generators accounted for about 50% of the nation's electric generating capacity in 2005, but that number fell to 33% in 2015, BLM said, adding further declines were expected. According to the U.S. Energy Information Administration (EIA) (Washington, D.C.), coal production dropped to around 774 million short tons, the lowest production in nearly 40 years. For details see January 10, 2017, article - EIA: U.S. Coal Production in 2016 Drops to Lowest Level in Nearly 40 Years .

The scoping report is the first step in a multi-year planned update to the nation's coal-leasing program. DOI said the release of the scoping report would be used to help write a draft PEIS, which will "further analyze and refine the reform options presented here and identify a menu of draft alternatives." After the public has a chance to comment on that draft PEIS, a final PEIS will be produced with a recommended roadmap for reforming the federal coal program. The final report is expected to be completed in early 2019.

Unless the Trump administration scuttles all of that first. And the mining industry is ready, willing and able to help the incoming administration bury the BLM effort. Trump has been critical of environmental regulation that limits energy development. But the BLM update is not a regulation, which means the incoming administration can easily scrap it if it wishes.

In a statement, Hal Quinn, president of the National Mining Association (NMA) (Washington, D.C.), blasted the BLM move: "The Secretary of the Interior's purported rationales to overhaul the federal coal-lease program rest on politically contrived reasoning that will result in less federal and state revenue, the loss of more high-wage jobs as well as an indispensable source of affordable electricity for millions of families."

He added Jewell's agency "has outsourced the Department's energy and land management responsibilities to 'keep it in the ground' activists by blithely accepting their unsupported contentions, beginning with the long-rejected notion that the current leasing system fails to deliver a fair return."

"If the administration was sincerely interested in increasing revenue," Quinn continued, "it would lift its moratorium on federal lease sales and commit to an efficient process that optimizes, rather than reduces, the benefits that flow to every American from the development of the nation's federal coal resources. Fortunately for coal miners and energy consumers, the coal leasing moratorium can be terminated on day one of the new administration."

BLM's scoping document also identified a number of what the agency called "good government modernization activities that will be taken in the near future to improve the (coal-leasing) program. These include increased transparency of the leasing program, increased protection for private surface owners, and opportunities to prevent wasted natural gas from coal mines." These mainly will be deployment of managerial best practices from the agency's Wyoming office to other state offices.

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