In this April 4, 2013 photo, coal is loaded onto hopper cars at the Spring Creek Mine near Decker, Mont. At least 30 applications from companies seeking to mine hundreds of millions of tons of coal face suspension as the government reviews its sales of the fuel from public lands, U.S. officials disclosed Friday, Jan. 15, 2016. (AP Photo/Matthew Brown)
In his final State of the Union address in January, President Obama made an ambitious pledge to overhaul the management of fossil fuels on America’s public lands in his final year, focusing, in particular, on the antiquated and little-known federal coal program.
“I’m going 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,” the President told Congress.
Days later, Secretary of the Interior Sally Jewell announced that, for the first time in three decades, the Bureau of Land Management would undertake a comprehensive review of coal mining on public lands. Until reforms are implemented, said Jewell, the BLM will not sell any new leasing rights to coal companies.
Less than five months later, the Obama administration’s efforts to reform the federal coal program are on a fast track, with listening sessions being held around the country, reform proposals being generated from members of Congress and experts, and public opinion in strong favor of reform.
For a federal program that was frozen in time for more than 30 years, the pace of change in the last few months has been impressive to even the staunchest advocates for reform. Here are three things to keep in mind as federal coal reform heats up:
The federal government has concluded that the coal program is shortchanging taxpayers
Some of the outrage with the out-of-date federal coal program stems from the belief that coal mined on U.S. public lands should give a fair return to taxpayers but currently does not. According to a report released Wednesday by the White House’s Council of Economic Advisers, the return to taxpayers doesn’t even come close to being fair.
“The government’s economists are formally acknowledging that the federal coal program is riddled with loopholes that enable coal companies to shortchange taxpayers, local communities, and western states hundreds of millions of dollars in lost royalty payments,” said Matt Lee-Ashley, senior fellow and director of the Public Lands Project at the Center for American Progress. “There is absolutely no excuse for the kind of self-dealing, contracting tricks, and financial shenanigans that coal companies are using to evade their royalty responsibilities.”
Instead of coal companies paying the 12.5 percent royalty rate mandated by federal law, the effective royalty rate they pay is closer to 5 percent. The economic analysis by the White House outlines industry-exploited loopholes and allowances that result in taxpayers missing out on approximately $290 million a year.
“For decades, coal companies have tried to dig their way out of paying their fair share to the American people to mine this tremendously valuable national resource,” said Senator Ed Markey (D-MA) in a statement. “[The] White House report shows that taxpayers truly are giving away this public coal at rock bottom prices and are losing out on billions of dollars a year.
Taxpayers and the environment are also getting the short end of the stick with the industry practice of “self-bonding.” Before they begin digging, mining companies are required to prove that they will have money or bonds available to clean up mining sites when the extraction is complete. In states that allow the coal industry to self-bond, many companies aren’t required to put up any collateral beyond their own financial health. So, in practice, the American people are left with the tab to clean up the environmental messes left behind when a coal company goes bankrupt. Some of the biggest players in the industry -- Peabody Energy, Alpha Natural Resources, and Arch Coal -- have all filed for bankruptcy in the past year. Senator Maria Cantwell (D-WA) recently introduced a bill, the Coal Cleanup Taxpayer Protection Act, that would limit the ability for companies to self-bond and would instead require the Department of the Interior to only approve of programs that would “result in no greater risk of financial liability” to the government than corporate or surety bonds.
The environmental costs of the federal coal program are increasingly clear
In addition to the land and water surrounding mines being at risk of neglect, the climate effects associated with mining, transporting, and burning coal are not currently considered in the federal coal-leasing program. For instance, the Department of the Interior has yet to publicly factor in thesocial cost of carbon when analyzing its coal-leasing regulations.
Even though this week’s White House report focused on ensuring a fair return to the taxpayer through raising the royalty rate on coal, it also acknowledged that “there is strong economic evidence of large external costs from coal production, transportation, and consumption.” It goes on to say that increasing the royalty rates -- especially if considering the social cost of carbon -- could improve economic efficiencies for taxpayers and better consider the environmental harms.
Concerned citizens are speaking up for reform
Since the administration’s move to update the federal coal program to account for taxpayer interests and environmental challenges, there has been a groundswell of support for reforming the federal coal program. Although congressional anti-parks caucus member Rep. Rob Bishop (R-UT) called the White House’s report “propaganda," at least six in every 10 voters in Western coal states support updating the coal-leasing program, according to a poll out his week by Public Policy Polling.
“The thing about this issue that unites a majority of Westerners is they are interested in making sure the government doesn’t waste taxpayer money when it comes to the use of natural resources,” said Chris Saeger, the director of the Western Values Project. “When publicly owned coal is being used to produce energy or to be sold to produce energy, it should be done transparently and that American taxpayers should get an honest return on that transaction.”
Next week, the Bureau of Land Management will wrap up a series of public scoping meetings in six cities held across the country through May and June. Turnout to the meetings has been high. At the most recent hearing in Seattle, more than 150 people signed up to speak, with critics of the coal program including ranchers, Native Americans, environmentalists, and others far outnumbering those in support.
Mary Ellen Kustin is the director of policy for the Public Lands Project at the Center for American Progress. You can follow her on Twitter at @mekustin. Jenny Rowland is the Research and Advocacy Associate for the Public Lands Project at Center for American Progress. Follow her on Twitter @jennyhrowland.