Federal Leasing Program A Giveaway To Big Coal, Government Watchdog Finds

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A long-awaited report by the Government Accountability Office (GAO) released Tuesday finds that the Interior Department is allowing Big Coal to shortchange the American taxpayer when companies buy lucrative leases to public coal in the West with almost no competition.

The latest in a long string of investigations into how Interior’s Bureau of Land Management mismanages the long-troubled federal coal program, the GAO report prompted Sen. Edward J. Markey (D-MA), who requested the probe, to call for a suspension of federal coal lease sales in the Powder River Basin of Wyoming and Montana until reforms are put in place.

“These noncompetitive practices are costing taxpayers in Massachusetts and across the nation, benefiting just a few coal companies who may be leasing public coal resources at bargain basement prices,” said Senator Markey. “Taxpayers are likely losing out so that coal companies can reap a windfall and export that coal overseas where it is burned, worsening climate change. This is a bad deal all around.”

The Powder River Basin — where coal resources are overwhelmingly owned by the federal government — accounts for about 41 percent of U.S. coal production, and about 13 percent of U.S. carbon pollution when that coal is burned.

Like previous reports, the GAO investigation found that the federal coal leasing program is rigged in favor of the coal companies that operate in the region — there is essentially no competition among coal companies when leases are offered for sale. Since 1990, the federal government has leased 107 coal tracts — one had three bidders, ten had two bidders, and the other 96 had just one bidder. And despite a legal requirement to charge coal companies fair market value the BLM processes for determining that value is seriously flawed.


The report also said that the BLM is not taking into account during its appraisal process the higher prices coal companies can obtain when they export coal abroad. And finally the report chided Interior for keeping the American public in the dark about the coal program by not providing access to its fair market value appraisal reports.

“The system is broken and until it gets fixed, taxpayers are going to be cheated again and again out of millions of dollars,” said L.J. Turner, a Wyoming rancher and member of the Powder River Basin Resource Council and Western Organization of Resource Councils who grazes cattle near the largest coal mines in area.

“The Interior Department has an obligation to the American people to make sure they’re getting fair value for this coal. Secretary Jewell should halt leasing any additional coal until the DOI can be more transparent and open in their process and ensure that taxpayers are not getting cheated anymore.”

The GAO report put no dollar figure on losses to taxpayers, but it did report that for every cent per ton that the BLM undercharges coal companies, there is nearly a $7 million loss to the Treasury.

A previous investigation by the Department of Interior Inspector General’s office last June, which was relatively limited in scope, found that the BLM was failing to collect tens of millions of dollars in lease payments. A more extensive private sector probe by the Institute for Energy Economics and Financial Analysis in 2012 found that taxpayers had been shorted nearly $28 billion since 1982.

Since it took office the Obama administration, despite its stated commitment to fighting climate change, has leased more than 2 billion tons of coal in the Powder River Basin. Lease sales for another 4.5 billion tons are in the pipeline. And the BLM is in the process of revising its so-called resource management plans for the Powder River Basin and is on track to green light future production of more than another 10 billion tons of coal.

This is not the federal coal program’s first scrape with financial scandal. Three times in its history coal sale moratoriums have been imposed by the government because of allegations of mismanagement. In the early 1980’s government investigators found that taxpayers had been shortchanged by $100 million.