Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on February 7, 2014
U.S. Selling Coal Mining Rights at Undervalued Prices
The U.S. government is violating federal leasing policies when it sells land to certain coal-mining companies, according to a new audit from an official watchdog agency.
The practice could be costing taxpayers millions of dollars even as mining operations degrade the environmental integrity of the Powder River Basin in the western U.S. states of Wyoming and Montana and lead to the production of large-scale carbon emissions. Although federal regulations stipulate that the Bureau of Land Management, a federal agency, must auction off coal tracts in a competitive bidding process, a Government Accountability Office (GAO) report released Tuesday found that this process wasn’t being followed.
Instead, for about 90 percent of the 107 leased tracts of land looked at by the GAO, only one company had bid on the land – typically the same company that submitted the application.
“[The GAO] offers a convincing argument that the programme lacks integrity,” Tom Sanzillo, the director of finance for the Institute of Energy Economics and Financial Analysis (IEEFA), a think tank, told IPS. “Because of a lack of independent oversight of 30 years of federal leases, they haven’t reviewed any of them.”
Sanzillo identifies two companies, Arch Coal and Peabody Energy, as the principle recipients of BLM leases. Critics worry that the lack of competitive bidding for coal mining firms undervalues the leases for publicly owned land, ultimately decreasing government revenues by effectively selling the land at discounted prices.
While an inspector-general for the U.S. Department of the Interior (BLM’s parent agency) indicated in a report last June that the U.S. had lost 60 million dollars as a result of undervalued leases, Sanzillo believes that the total revenue loss is far greater. In an analysis responding to those findings, Sanzillo noted that the inspector-general did not take into account the BLM’s methodological flaws in establishing the value of public coal.
The inspector-general “identifies at least three weaknesses in the BLM program,” he wrote, “no independent verification of engineering and geological data, no revenue estimates for projected export sales and a failure to use comparable sales data when setting bid prices.”
Furthermore, both the GAO and inspector-general reports note that the BLM has not included Arch and Peabody’s revenues from coal exports when determining the value of the publicly leased coal, further undervaluing its true worth. (The BLM did not respond to IPS’s inquiry by deadline.)
“They’re giving away federal access at a price that is far below what they should be giving it away for,” said Sanzillo. “Therefore the federal government, and particularly the states of Wyoming and Montana, are being short changed.”
The GAO did a similar review of coal leases in the Powder River Basin in 1983. At that time, the agency found that the government was losing some 100 million dollars as a result of undervalued coal leases, but the GAO’s recommendations to rectify the problem were never implemented.
The GAO’s more recent report recommends that the BLM use more than one method to determine the true value of its coal while taking export profits into account. It also suggests that the agency develop a reporting mechanism and post information about its lease sales on its website.
While the Department of the Interior has agreed with these recommendations, Sanzillo’s analysis indicates that BLM has been highly resistant to transparency.
Environmental degradation
In addition to the loss of revenue, coal-mining operations in the Powder River Basin have profoundly impacted the region and raised some serious concerns among local and national environmental advocacy groups.
“The Powder River Basin is one of the most significant contributors to carbon emissions in the U.S.,” Kelly Mitchell, a climate and energy campaigner with Greenpeace, an environmental advocacy group, told IPS. “Thirteen percent of U.S. carbon emissions are sourced from the Powder River Basin.”
The region’s total carbon emissions are expected to increase even further once the BLM grants leases for more coal mining.
“There are about five billion tonnes of federal coal somewhere in the leasing pipeline right now,” said Mitchell. “If all that coal is leased, it would unlock more than 8.3 billion metric tonnes of carbon-dioxide, or the annual emissions of more than 1.7 billion cars.”
The Powder River Basin Resource Council has asked the BLM to suspend coal-mining operations until it rectifies the flaws in its leasing programme. In addition to the economic issues of the coal leases, the organisation is equally concerned about the environmental issues that arise from coal mining.
“We believe coal leasing should be suspended until some of the environmental impacts get addressed,” Shannon Anderson, an organiser with the Powder River Basin Resource Council, a Wyoming-based environmental protection group, told IPS.
“There are impacts from reduced air quality, loss of water and major draw-downs of our aquifers, which are primary drinking-water sources. We’ve seen a dramatic loss of acreage available to the public for recreational purposes, like hunting, hiking and [livestock] grazing.”
Wyoming produces 40 percent of all coal mined in the U.S. and the federal government owns 85 percent of the state’s coal. This makes Wyoming one of the most popular states for the energy industry to lease public land.
Opposition to the practice of leasing public lands to the energy industry has grown in recent years. The administration of George W. Bush auctioned off of 103,000 acres of land in Utah, another western state, for coal and gas leases, a move that was met with widespread public protest.
According to the GAO, 74 percent of public land leases issued to energy companies between 2007 and 2009 were protested by the public in Wyoming, Utah, Colorado and New Mexico.
In early 2009, the administration of President Barack Obama instructed the BLM that “there is no presumed preference for oil and gas development over other uses”. It also began telling the energy industry which pieces of land are most suitable for mining, drilling or “fracking” with minimal environmental impact.
However, the energy industry may still nominate parcels of public land to lease, and the reforms have not addressed the issue of undervalued leases or the public’s environmental concerns in the Powder River Basin and elsewhere.
12 Comments on "U.S. Selling Coal Mining Rights at Undervalued Prices"
Davy, Hermann, MO on Fri, 7th Feb 2014 2:15 am
Costs are escalating rapidly and the quality or heat content is going down. Sounds like a bad business plan to me or a dangerous scenario for a coal dependent world.
DC on Fri, 7th Feb 2014 3:01 am
Two words
:Corporate Welfare.
Now you could call it, externality, subsidy, payola, or a number of things describing the same idea and you would exactly right.
I think we would hard pressed to come up with any (large)industry, extractive or not, that hasn’t had its costs underwritten in a big way by gov’t in the last 150 years. Full cycle cost accounting is a concept that never really took off in a big way in the west …..
GregT on Fri, 7th Feb 2014 7:16 am
Yup,
Smart like yeast.
Davy, Hermann, MO on Fri, 7th Feb 2014 12:16 pm
Yeap, I have dealt with coal before I became a farmer. I financed some big deals. I got out of that business because I could not stand the rape and pillage. I love mother earth..anyway…What I saw was a culture of what was once the wild west as far as exploitation and the buddy buddy system. It was the 19th century.
One word about coal. The lights will go out if you think you can get rid of it. All bets are off if the lights go out. And please don’t spew any renewable crap, clean gas, and or nuke. In a different world of rational people in a properly populated earth using the remaining fossil fuels properly we could maybe make that transition. A transition to a world of intermittent power, seasonal food, and local consumer goods. Tain’t happenin with renewable other than a niche. The sooner these environmentalist that drive a very green car realize this the better. I mention the car because you are not green if you have a car…period!
Davy, Hermann, MO on Fri, 7th Feb 2014 12:24 pm
Just a word on being a farmer I did the production ag on 1000 acres with corn and soy. Again it was rape and pillage. I am now doing low impact grass fed beef in an area with comparative advantage for this type of farming. I treat the animals like pets and they live a good life. Their death comes in a proper fashion without the stress of transport to the slaughter house but in the field. When it happens they don’t know what hit them. Sounds like a good way to go to me..
rollin on Fri, 7th Feb 2014 1:23 pm
Where is the plan? “We believe coal leasing should be suspended until some of the environmental impacts get addressed,” Shannon Anderson, an organiser with the Powder River Basin Resource Council, a Wyoming-based environmental protection group, told IPS.’
So leasing is suspended for a couple of years. A few years from now the electricity stops and/or gets extremely expensive across a number of states because there is not enough production. Riots start, possible revolution.
How about just adding a tax on the coal that is directly used to build out alternative power sources and increase efficiency of traditional ones? How about increasing the price of the lease to fund further development and implementation of non-polluting sources?
How about a real plan that will eventually get us off coal and natural gas for electric production?
Davy, Hermann, MO on Fri, 7th Feb 2014 4:11 pm
Good luck with that Rollin…
coal companies are going broke now
renewables are a joke for anything more than 20% power generation market share. It is unproven beyond that market share amount except in niche countries like Iceland. Without storage and a huge build up that would be incredible, renewable power is a dead end
Kenz300 on Fri, 7th Feb 2014 5:38 pm
Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are the future.
Around the world renewables continue to grow in use.
Technology improvements and economies of scale are causing the price of renewables to drop.
The price of oil, coal and nuclear keeps rising and causing environmental damage.
The price of wind and solar have dropped by 50% in the past few years and continues to fall making it more competitive and cost effective.
The world is transitioning to safer, cleaner and cheaper alternative energy sources.
Kenz300 on Fri, 7th Feb 2014 5:43 pm
Oil, coal and nuclear power plants require huge amounts of water to generate electricity. That is a problem in areas that are already stressed and do not have water to spare.
Wind and solar power plants require little or no water to generate electricity.
This is becoming a more important factor when considering energy sources.
Davy, Hermann, MO on Fri, 7th Feb 2014 6:44 pm
Kenz, come-on, do you really thing renewables can make it in a collapsed world. If the world does not collapse do you really thing renewables can be produced with an ever shrinking amount of fossil fuels? Do you think renewables will generate enough energy profit to build out new product and repair existing renewable infrastructure. It is a dead end street without fossil fuels as the primary support in manufacturing, transport, and repair of renewables. It will occupy a niche and that is it. The numbers do not add up. It is like saying robots are going to gain artificial intelligence then start building robots. Sound like a Hollywood movie. In a world of collapsing Capex and collapsing government subsidies renewables will fall on their face. Renewables have a huge upfront cost then a long payback. That is a recipe for an energy trap. Thank China for the drop in the cost currently. Check into why Chinese companies are going broke in that field it is called over capacity dropping prices but also profit. Don’t get me wrong I have solar here on the farm. I believe in using every silver bullet possible to delay the energy gradient that will take down our complex society. Let’s just be realistic about possibilities if not we are living in a fantasy world.
DC on Fri, 7th Feb 2014 8:04 pm
KenZ has only 3 or 4 thoughts on any matter presented here.
-Hydrogen cars will save ‘us’
-Renewable’transition’ is underway
-Third worlders are too dumb to know when to stop breeding.
-Competition is magic.
Did I miss anything?
rollin on Sat, 8th Feb 2014 1:08 am
Arch and Peabody are making money. Nobody knows what the Koch’s are making, they don’t report.
With at 30 billion dollar subsidy from the US, they should be making some money. http://www.ieefa.org/study-almost-30-billion-in-revenues-lost-to-taxpayers-by-giveaway-of-federally-owned-coal-in-powder-river-basin/
Keep it in the ground, was the old way. Shut down and wait for prices to go up.
If coal was such a money loser, they would shut down and not come back.
Hey Davy, they said men would never fly also or go past 25 mph. Get with the twentieth century at least. Solar is going up at a GW a year in my state. Have you actually done the calculations or are you just mimicking the Koch brother’s minions propaganda?
The economy is not the primary pusher of energy, energy is the primary pusher of the economy. Always was, always will be. Seems to be a conspiracy to think that money can create energy. LOL