Noncompetitive Coal Leasing Policies Cost U.S. Taxpayers $29 Billion Since 1982

Most Americans don’t realize just how much coal they own.

Consider this: coal accounts for two thirds of resources extracted from public lands for electricity generation. And Americans also own most of the Powder River Basin, a region stretching across Wyoming and Montana that accounts for roughly 43 percent of America’s coal.

With all that coal being the property of U.S. citizens, you’d think the taxpayers were getting a lot of revenue from selling the resource to the coal companies. Not so much.

A new report concludes that uncompetitive leasing and poor oversight has denied American taxpayers up to $28.9 billion since 1982.

According to an analysis from Tom Sanzillo, director of the Institute for Energy Economics and Financial Analysis, the government allows coal companies operating on public lands to purchase the resource at a price far below market value by supporting “auctions” with only one bidder.

This is a problem that environmental groups have raised for some time. But the new analysis shows just how much it’s costing American taxpayers:

As a result of policy choices and an inherently subjective and flawed fair market value appraisal process—the problems of which are exacerbated by the agency’s failure to consider changing market dynamics—the U.S. Treasury has lost approximately $28.9 billion in revenue throughout the last 30 years. Despite past political scandals and promises of programmatic reform, neither the DOI nor the BLM coal leasing activities have been audited or the subject of any major publicly available, external review regarding the sale of PRB coal for almost thirty years. As applied by the federal government in the case of federal coal leasing, the term “fair market value” rings hollow.

Since 1991, the Bureau of Land Management has issued 26 leases to coal companies. According to Sanzillo, only four of these leases have ever featured more than one bidder. And in the cases where there was actual “competition,” the auction featured two bidders.

Today, as coal consumption drops in the U.S., companies are now purchasing coal from taxpayers at ridiculous discount rates and selling the dirty resource to the highest bidder on the international market — thus subsidizing the boom in global warming pollution in Asia. (See: The BLM’s Corrupt Coal Leasing Program: Billions In Subsidies To Peabody, Gigatons Of Carbon Pollution For The Rest Of Us.)

After a recent auction of Powder River Basin coal in which Peabody Energy was the only bidder, Grist’s David Roberts did some simple and shocking math:

The winning price in Thursday’s sale? $1.11 per ton.

Again: $1.11 per ton.

The price of a ton of Powder River Basin coal on U.S. spot markets? $9.15 per ton, as of May 11.

The price of a ton of coal exported to China? It averaged $97.28 per ton [PDF] in 2011. It’s now up to $123 per ton.

So, to summarize: You, the U.S. taxpayer, just leased another huge chunk of your land to Peabody Coal at $1.11 per ton of coal. Peabody will strip-mine that land and take the coal to China, where it will sell it for over $100 per ton. Peabody pockets enormous profits*, the U.S. taxpayer gets devastated land, and China accelerates global warming.

And it’s all being pushed through by the Obama administration.

Until now, the government has done nothing about the lack of competition in these auctions. But now that analysts, environmentalists, and lawmakers are finally elevating the issue, the Government Accountability Office is now set to do an audit of the leasing program.

Meanwhile, the BLM is set to “auction” another 721 million tons of taxpayer-owned coal from the Powder River Basin next week.

13 Responses to Noncompetitive Coal Leasing Policies Cost U.S. Taxpayers $29 Billion Since 1982

  1. SecularAnimist says:

    Stephen Lacey quoted Dave Roberts: “And it’s all being pushed through by the Obama administration.”

    Once again: the problem is not the Obama administration’s bad “messaging”.

    The problem is the Obama administration’s bad policies.

  2. Dan Ives says:

    Very well said (and your repetition of that conclusion indicates that you understand messaging).

  3. MorinMoss says:

    I guess this proves Obama is the Manchurian candidate, after all :-)

  4. squidboy6 says:

    We have to force Congress to start charging more for resources on public lands. Attacking on all fronts is the norm now.

  5. MorinMoss says:

    How about forcing them to LEAVE PUBLIC LANDS ALONE?!?!

  6. mulp says:

    Right, the voters gave Obama a Congress that is attacking him for not promoting free pillage and plunder of public lands and the environment, and its Obama’s fault when he refuses to use his military authority to become a dictator.

    When Congress didn’t pass the energy and climate bills in 2009-10, why didn’t you deliver enough votes to put 70 Democrats in the Senate and to widen the House majority?

    Instead you delivered a Congress in 2010 even more determined to rape the American people.

  7. mulp says:

    Use the right language: the coal and oil laws the Republicans want are designed to have Congress – Republicans – pick the winners.

    When the Republicans attack Democrats for “picking the winners”, what they are really saying is “you are picking the wrong winners who will hurt the profits of the winners we back.”

    Note how Republicans back bringing in the heavy sour crude from Canada, but don’t want to see the Bakken crude which is light and sweet to come to market because it will eliminate the profit from the heavy crude found on public lands. Note the Bakken crude is not coming from Federal land, but is instead coming from private land where individual landowners have negotiated high royalties.

    It is all about Congress picking the winners.

    Peabody coal, with American taxpayers and workers the losers.

  8. Mike Roddy says:

    An objective observer would conclude that BLM bureaucrats are getting cash under the table. There could be no other motivation to so blatantly give the finger to the public interest.

  9. David B. Benson says:

    The gist is right but Peabody sells relatively little coal to Asia. The only export terminal AFAIK is in Tsawwassen, British Columbia. Coal from both the US and Canada is shipped to Asia. Traditionally the buyers were in South Korea and Japan. I doubt the demand in South Korea has lessened; the demand in Japan has grown with the NPP shutdowns. I don’t know how much actually goes in China; I suspect relatively little.

    The other factor is the transportation cost. The minehead price of around US$9 becomes more like US$50 after deliver to the midwest. Similarly for transportation to Twawassen and across the Pacific.

    In east Asia Powder River coal has to compete with coal from Indonesia and Australia so I doubt the profit margins are spectacular (although with the increase in Japanese demand profits will be good.)

    Still, the long standing BLM arrangements are fairly outrageous. Doubling the lease price for Powder River coal clearly would have only a minor impact on the eventual sale price.

  10. Joan Savage says:

    Bear in mind the quality of the particular coal, and its niche market.

    “402 million tons of ultra low sulfur coal reserves” were what was on the table (or in it) in the recent Peabody purchase.

    Read more:

    Ultra-low sulfur coal can be used as a component in metallurgy, not as energy.

    Although low-sulfur coal is often blended with high-sulfur coal to meet emissions standards, ultra-low sulfur coal is in an elite class by itself.

    I’d like to see more fine tuned estimates of its market value.

  11. SecularAnimist says:

    mulp wrote: “you delivered a Congress in 2010 even more determined to rape the American people”

    I voted the straight Democratic ticket in 2010, mulp. And I voted for Obama in 2008. I have voted for Democratic candidates for the presidency, for the Senate, for the House, and for local government every year since I voted for George McGovern in 1972, which is probably before you were born.

    And yet you say that I “delivered” the Tea Party Republican House.

    Why would you say such a thing?

    I’ll tell you why. Because you cannot accept and will not tolerate ANY criticism of ANY Obama policy, for ANY reason, from progressives. That’s why.

    Obama’s “Drill Baby Drill” energy policies have not been forced on him by the Tea Party. They are the product of his own administration. And they reflect his real — as opposed to his stated — priorities.

  12. squidboy6 says:

    Forcing them to leave public lands alone will not happen – you have to make incremental changes to reach a goal, and that’s why the republicans have gotten so much of what they wanted, they started with tiny steps until they reached total control. We have to force them back and retake the resources through small steps which they can’t oppose en masse.

  13. squidboy6 says:

    Yes, we know that it’s wrong to dump these things on the market so individuals get huge profits but the way to change the game is to do it with small blows. Increase the costs, share the profits, make them acknowledge the sources, public resources, and lower their profits. Bleed them until they quit.