An Interior Department agency that oversees sales of coal owned by all Americans is allowing big coal companies to purchase the fuel for just pennies on the dollar and then sell it abroad at a huge markup, a new report on the troubled federal coal program concludes.
“Private coal companies are buying federal coal on the cheap -– and when market conditions are favorable they can make a killing selling that coal to Asia,” said Clark Williams-Derry, the author of a report issued by the Sightline Institute.
The report, “Unfair Market Value: By Ignoring Exports, BLM Underprices Federal Coal,” examines how the market in western coal functions under the control of the federal Bureau of Land Management which oversees nearly a quarter billion acres of public land, most of it in the West. The report adds fresh details to a key finding of a 2013 report by the Interior Department’s inspector general which concluded that the BLM does not take into account the value of coal exported overseas when it determines the fair market value of the coal it sells to industry. Under longstanding federal law, the BLM must charge coal companies fair market value for federal coal.
The Sightline Institute study looked at seven western mines in Montana, Colorado, Utah, and Wyoming and their operations in recent years as exports of western coal have soared, from less than 7.6 million tons per year in 2006-2009 to nearly 19 million tons per year in 2010-2012.
Since 1990, the BLM has sold 8.5 billion tons of public coal in Montana, Wyoming, North Dakota, and Colorado. The bulk of that coal, 7 billion tons, was sold to big coal companies for less than $1 a ton, and more than a quarter of it for 25 cents a ton or less.
On the vast majority of sales in the past 20 years –- 18 of 21 -– in the Powder River Basin of Wyoming and Montana attracted only a single bidder. The Powder River Basin is the source of most federal coal.
Coal companies that buy federal coal at very low prices can turn around and sell on the export market for a great deal more if conditions are right. The study found, for example, that Cloud Peak Energy was able to pay just 18 cents a ton for federal coal at its Spring Creek Mine in Montana and sell it in Asia for $60 per ton.
The Sightline Institute study was done in collaboration with four landowner and conservation groups, the Western Organization of Resource Councils, the Northern Plains Resource Council, the Powder River Basin Resource Council and WildEarth Guardians.