The Obama Administration Announces Overhaul Of Federal Coal Leasing Program
The last time rules for coal mining on tax-payer public lands were updated, smoking was allowed on airplanes, airbags weren’t required in cars, and sewage was still dumped into the ocean. But today, the Obama administration announced a package of reforms to modernize and reform the federal coal leasing program. Interior Secretary Sally Jewell announced the plan, saying it was long past time to re-examine the coal-leasing program. “It is abundantly clear that times are different in the energy sector now than they were 30 years ago, and we must undertake a review and that’s what we need to do as responsible stewards of the nation’s assets,” she said.
The plan includes three measures to update the federal coal program to account for taxpayer interests and environmental challenges: The U.S. Department of the Interior will conduct a review to identify potential reforms to the program, direct the U.S. Geological Survey to begin annual tracking and reporting on greenhouse gas emissions that come from fossil fuel extraction on public lands, and put a temporary pause on new coal leasing, which will not apply to existing leases.
Coal companies currently have stockpiled billions of tons of unmined coal that is ready to be developed, so a targeted pause on leasing will likely have no impact on jobs, coal production, energy prices, or grid reliability. But it will keep at least 3.5 billion tons of coal from being added to the already-enormous stockpile coal companies have on public lands and allow time to figure out how to best change the current program to ensure taxpayers get their fair share from coal mined on public lands.
The current federal coal-leasing program is fundamentally noncompetitive. Under the current system, taxpayers are missing out on millions of dollars in royalties from leasing energy sources on public lands. Offshore oil and gas drilling is subject to an 18.5 percent royalty charge, but coal companies only pay a 12.5 percent royalty rate for mining on federal lands. Furthermore, royalty rate reductions, loopholes, subsidies, and self-dealing transactions further reduce the effective royalty rate coal companies pay to less than 5 percent. Because the current system fails to ensure mining companies pay royalties on the true market price of the coal they extract, coal companies are able to take advantage of billions of dollars of de facto subsidies.
A flawed royalty system is not the only way the true cost of coal is being undervalued. The environmental impacts of coal, including its contribution to climate change, also impose a cost to the American public. More than 57 percent of all emissions from fossil fuel production on federal lands comes from the combustion of coal. Coal mining in the Powder River Basin alone, which spans across Wyoming and Montana, is responsible for 10 percent of all greenhouse gas emissions in the U.S.
Strip mining and failed mine reclamation produce air and water pollution, which add to coal’s environmental costs. Furthermore, some companies are trying to get out of their responsibility to clean up their mines on public lands, which could leave taxpayers holding the bag for billions of dollars in reclamation costs.
BOTTOM LINE: Not much has stayed the same since the 1980s and the energy sector is no exception. Reform of the federal coal program is long overdue. The Obama Administration’s steps to modernize and reform the program will help reduce the environmental and climate impacts, ensure that taxpayers are getting a fair return, increase transparency and accountability, and hold companies responsible for cleaning up their mining operations.
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