Land | Ecotrope

As Exports Take Off, Are Feds Lowballing Coal Leases?

Ecotrope | April 24, 2012 9:48 a.m. | Updated: Feb. 19, 2013 1:31 p.m.

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Prices for U.S. coal can go for $20 a ton overseas, but the highest bid the Bureau of Land Management has gotten for a coal lease in the Powder River Basin is $1.10 a ton. U.S. Rep. Edward Markey asked the Government Accountability Office to investigate whether the BLM should be charging more.

Prices for U.S. coal can go for $20 a ton overseas, but the highest bid the Bureau of Land Management has gotten for a coal lease in the Powder River Basin is $1.10 a ton. U.S. Rep. Edward Markey asked the Government Accountability Office to investigate whether the BLM should be charging more.

U.S. Rep. Edward Markey is wondering whether the federal government should be charging coal companies higher prices for leases of publicly owned coal tracts in the Powder River Basin.

In a letter to the Government Accountability Office sent today, Markey said shrinking U.S. coal reserves combined with a growing coal export market might mean the Bureau of Land Management should be charging more for its leases of land in Wyoming and Montana.

The BLM is in charge of coal leasing on 570 million acres of land and is supposed to award leases only if an offer meets “fair market value,” Markey explained in his letter.

As a ranking member of the House Natural Resources Committee, Markey asked the GAO to examine national trends in coal production, and the number of bids BLM has gotten on publicly owned coal tracts, the process BLM uses to determine fair market value for coal leases, and whether the value BLM is using reflect prices in export markets.

“Coal exports are rising as U.S. electricity producers move away from coal in favor of natural gas and renewable energy,” he wrote. “With such rapid market changes taking place, American taxpayers must be assured they are receiving the full value for energy resources held in the public trust, especially when mining companies are seeking to export hundreds of millions of tons of coal for premium prices.

… Companies mining federal leases in Wyoming and Montana are increasing coal exports not only because of declining U.S. demand but also because they can sell coal for higher prices in foreign markets.

… We lack information about how the rapid growth of coal mining on federal land combined with shrinking reserves and increasing exports produced from federal leases affect the value of U.S. coal,” he wrote. “The House Natural Resources Committee has an interest in ensuring that BLM’s leasing process promotes competition for coal tracts and that the “fair market value” established by BLM is accurate.”

Markey laid out his case for why the GAO should reexamine the BLM’s procedures in leasing land for coal mining. Among his reasons is the boom in exports through existing coal terminals and the explosion of applications for new export terminals in oregon and Washington.

  • Last year, 107 million tons of coal was exported – the highest in two decades and equal to 10 percent of domestic coal production.
  • Peabody Energy predicts coal export capacity could more than double in five years to 250 million tons.
  • The GAO hasn’t reviewed the federal coal leasing program since 1994.
  • Since 1994, the coal industry has moved from depleted coal reserves in the East to production on federally leased coal mines in the West.
  • Federally leased coal makes up 40 percent of U.S. coal production.
  • Almost all the federally leased coal is mined in the Powder River Basin.
  • Arch Coal told investors that Powder River Basin coal sold to international customers for more than $20 a ton. The highest price the feds have ever received for a coal lease in the Powder River Basin was $1.10 per ton.
  • Coal producers in Wyoming, Montana, Colorado and Utah have signed agreements to export coal through British Columbia, Stockton, Calif., Richmond, Calif., Texas, New Orleans, Louisiana, and Wisconsin.
  • Coal exports through Vancouver, B.C., increased 300 percent from 2009 to 2011.
  • In 2008, the U.S. Geological Survey reduced estimates of easily recoverable U.S. coal reserves from 47 percent of the remaining Powder River Basin coal to 6 percent.
  • Since 1990, coal production from federal leases has increased 78 percent, peaking in 2004.
  • The number of active coal leases managed by BLM has tripled since 1990 to more than 300.

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