RBC I The Interior Department announced Jan. 15 an immediate moratorium on new federal coal leases, as it undertakes a multi-year review of a program that provides about 40 percent of the coal used for electricity nationwide.
The announcement came just days after President Barack Obama said in his State of the Union address that he was going to push to change the way the country manages its oil and coal “so that they better reflect the costs they impose on taxpayers and our planet.”
Until now, the Obama administration largely managed federal coal as if climate change did not exist.
Interior Secretary Sally Jewell conceded as much in a conference call with reporters on Jan. 15, saying the program “was really about getting as much coal out of the ground as possible” and had been that way for 30 years. Now she and White House officials say the program should be updated to reflect the impact that coal-burning has on the climate and to ensure that taxpayers and local communities near the mines get a fair share from that public coal.
This announcement comes after the countries of the world agreed in Paris in December to work together to reduce greenhouse gas emissions. Coal is the dirtiest source of electricity in terms of greenhouse gases and other air pollution.
Jewell in March put the industry on notice, saying she was considering updating the federal coal program with climate change in mind. She held five listening sessions this past summer, including one in Washington, D.C., and another in Gillette, Wyo.
Coal industry representatives say the administration was ignoring them if it concluded that the right thing to do was to make it even more costly and cumbersome to mine federal coal.
“It is stunning that the administration believes a process that already pushes the development of coal projects beyond a decade needs more red tape and delays,” says Hal Quinn, the president and CEO the National Mining Association.
“This is yet another salvo in the president’s efforts to kill the coal industry. He and his allies in the extreme environmental movement know full well that this measure will make federal coal uneconomical to mine, thereby locking up America’s most abundant and reliable source of electricity generation,” Wyoming Mining Association Executive Director Jonathan Downing said.
Jewell and others in the administration said that companies already have access to plenty of coal through leases they already hold and predicted that the moratorium should have no impact on production. Exceptions will be made, for instance, if mines are close to running out of coal.
Independent experts confirmed that there is enough coal already leased to keep operations busy for at least 10 years in Wyoming, where the vast majority of federal coal is mined.
“The real issue here is that no coal company is really in a position to buy more leases right now, given the market,” says Robert Godby, an economist at the University of Wyoming.
On the other hand, the outcome of the review could be very consequential to the coal industry, in a process Jewell says would take three years.
Among other issues, the review will consider whether royalty rates should be changed. Concerns about taxpayers not getting enough return on federal coal were raised in reports in recent years by the Government Accountability Office and the Interior Department’s Inspector General.
Environmentalists and former administration officials argue it should be raised to reflect the cost to society of burning coal. Local citizens near the mines argued against raising royalties for fear of losing jobs.
Some from the mining industry say the royalties already are above market rates and increases could drive them out of business and threaten the reliable supply of coal. The review also will consider the agency’s practice of discounting royalties in response to companies’ requests.
Another issue to be addressed by the review is whether the companies pay too little for coal leases because there is only one bidder for about 90 percent of lease sales.
With only a year to go in the Obama administration, the next president and his or her appointees will have sway over the outcome. Democratic frontrunner Hillary Clinton has suggested that she would put new fees on coal and help retrain coal workers. Republicans generally support the coal rules as they are and accuse Obama of conducting a war against the industry with air pollution regulations and the Clean Power Plan.
Environmentalists, who increasingly have put pressure on the administration to fight climate change by stopping the extraction of fossil fuels, exalted in the news of the moratorium and the review.
“It’s time to keep our publicly owned coal in the ground and stop letting coal companies profit off the destruction of our planet,” said Jeremy Nichols of WildEarth Guardians, who has repeatedly sued the federal government over its coal leasing program.
These actions were not unprecedented. Presidents Richard Nixon and Ronald Reagan launched moratoria on coal leasing when they reviewed the federal coal program in the 1960s and 1980s.
The leasing moratorium and uncertainty sparked by the review further vex a beleaguered industry. Two of the biggest U.S. coal companies, both big players in federal coal, have filed for bankruptcy protection in recent months, swamped in debt from bad investments and hampered by the low price of natural gas and by state and federal air pollution regulations.
So, despite their protests, Godby says, “The cost impacts of this decision will not really be felt for years, and coal has all the trouble it can handle with market conditions right now.”