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Are feds getting short-changed on Wyoming coal leases?

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Loading coal in the Powder River Basin. Photo by USGS.

IG report shows flaws in leasing program

By Summit Voice

SUMMIT COUNTY — The fossil fuel industry — specifically Big Coal — is shafting Americans every which way, from spewing heat-trapping greenhouses gases into the atmosphere to underpaying the federal government for the coal it takes from the Powder River Basin.

A report by the Department of Interior’s Inspector General found that U.S. taxpayers are likely losing tens of millions of dollars on bids from mining corporations as a result of a federal leasing program that undervalues the price of coal.

Even though the agency has a legal obligation to the American public to secure a fair market value for coal, it is not meeting its responsibilities to taxpayers, according to grassroots watchdog groups.

The IG investigation does not try to estimate the full scope of coal losses resulting from undervalued leases, but rather points to policy “weaknesses” and “flaws” that compound into substantial costs to taxpayers. As an example, it points to several recent mining leases in the Powder River Basin alone where missteps in the valuation process cost taxpayers at least $62 million.

“The system is completely 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 multi-generational rancher in the Powder River Basin who grazes cattle near the largest coal mines of the area. He is a member of the Powder River Basin Resource Council and Western Organization of Resource Councils.

The Powder River Basin, which stretches across southeastern Montana and northeastern Wyoming, currently produces 44 percent of the coal mined in the nation.

According to the IG report, BLM officials regularly low-ball the value of coal, allowing mining companies to pay far lower than market value for what they mine and sell. Even errors that undervalue coal by as little as a penny a ton can add up to multi-million dollar losses for taxpayers because of the enormous size of tracts that are leased at auction, the report concluded. There are currently close to 4 billion tons of Powder River Basin coal in the pipeline for possible coal leases, according to BLM data.

An independent economic analysis on the federal coal leasing program conducted last year found that as a result of these policies that are highly favorable to the coal mining industry, taxpayers over the past 30 years have cumulatively lost almost $30 billion in revenue. That report raised a number of questions that led the IG to undertake its investigation.

Mining corporations such as Arch Coal, Peabody Energy and Cloud Peak Energy have argued that allowing them to pay less than fair market value for coal from public lands benefits Americans because it keeps coal cheap, which helps keep down prices for electricity. Since 2001, however, coal’s share of the electricity market has fallen from roughly 50 percent to about 40 percent as utilities switch to energy sources such as natural gas, wind and even solar.

As a result, mining companies are looking for new markets for their coal overseas. But as the inspector general report noted, the BLM is not fully accounting for the added value of coal that is intended for export, especially to Asian markets.

Coal exports more than doubled in the U.S. to 125 million tons between 2007 and 2012. But even though the price paid to companies for that coal also doubled, the price they paid for leases does not reflect the dramatic increase in fair market value.

“The Interior Department has an obligation to the American people to make sure they’re getting fair value for this coal,” said Turner. “Secretary Jewell should put the brakes on any additional leases until the DOI can ensure that taxpayers aren’t getting cheated anymore.”

The Powder River Basin Resource Council is a landowner and conservation group based in Sheridan, Wyo. The Western Organization of Resource Councils is a Billings, Mont. based network of conservation and family agriculture organizations, including Powder River.

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