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The Coal Moratorum — Politics Again Masquerading as Policy


By Luke Popovich

Is there a pattern here? Or is it just paranoia? You be the judge.

The Clean Power Plan (CPP) — The Environmental Protection Agency (EPA) shows virtually no environmental benefit for climate change, yet threatens our industry with capacity destruction and the economy with a $217 billion wholesale electricity cost increase.

The Stream Protection Rule — The Office of Surface Mining (OSM) data shows virtually no off-site impacts, but would sterilize up to 64% of coal reserves nationwide and send up to 79,000 to the unemployment lines.

The Sage Grouse protection plan — The Fish & Wildlife Service said this inedible creature is not endangered, but to protect its habitat (i.e., the Mountain West) BLM withdraws 10 million acres of federal land from mining anyway.

I may be paranoid, but even paranoids have enemies. To prove it, along comes the Department of the Interior’s moratorium on federal coal lease sales.

The Obama administration has announced a three-year moratorium on the leasing of coal reserves located on federal lands. Because the coal from these surface mines accounts for 42% of total U.S. production, such a moratorium could eliminate a major portion of domestic coal supplies, creating less fuel diversity with serious consequences for power generation.

In addition, a moratorium on federal coal would also deprive U.S. taxpayers of billions of dollars in revenue. Coal currently leased from federal lands generates $1.6 billion in annual royalties along with nearly billions in revenues from rents, bonuses and other payments. States with federal coal leases would also see revenue drop, draining state budgets, and forcing higher taxes or painful reductions in services. Wyoming has already warned that school funding may be cut due to falling coal revenue.

Beyond the revenue it generates, the greatest value of federal coal may be its central role in anchoring a stable, reliable mix of electricity sources. A study by IHS Energy found that the current base load generation mix anchored by coal saves ratepayers roughly $93 billion in annual electric bills while also reducing utility bill volatility by 30%.

The risk posed by this moratorium is bad enough, but it’s all the more reckless for being unnecessary. The current coal leasing program doesn’t need major reforms, let alone a work stoppage. Thorough environmental reviews and fair market value determinations are already in place to ensure the environment is protected and taxpayers receive proper value for coal sold at auction.

In fact, the argument that taxpayers are somehow denied a fair return from the current federal coal program falls flat. The 12.5% royalty paid on coal leased from federal land is approximately 40% higher than rates paid for coal mined on private land in Appalachia. Companies pay additional fees based on the coal under lease, not on the volumes actually mined and marketed. Recent investigations by the Government Accountability Office and the Department of the Interior’s inspector general found no reason to overhaul the program.

Undaunted, the Obama administration has floated the idea of increasing the royalty rate for leased coal. But doing so could kill off a number of coal producers already surviving on a tight margin and deprive taxpayers of any value. Higher royalties will discourage production, keeping affordable energy off the market and revenue from taxpayers.

Without a defensible rationale for its coal lease moratorium, we’re left with the Obama administration’s political rationale. It wants to keep faith with climate change activists who are determined to keep fossil fuels in the ground. But keeping faith with climate alarmists will break faith with taxpayers and consumers. They derive zero benefit, let alone a “fair” return, when coal is locked underground.

The federal coal leasing program fairly values an important public resource that is sold at auction and generates substantial revenue for America’s taxpayers. A move to replace the current program with costly new fees and royalties, or with a flat-out moratorium, serves no legitimate public purpose. An administration whose days are thankfully numbered should find better ways to secure its legacy.

Luke Popovich is a spokesperson for the National Mining Association, the industry’s trade group based in Washington, D.C.