Coal companies get sweetheart deals on federal leases, shortchange taxpayers

By Claire Thompson

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As if climate disruption, air pollution, health problems, and landscape destruction weren’t bad enough, here’s another reason to hate the coal industry: Coal companies are shortchanging U.S. taxpayers out of tens of millions of dollars they should be paying for the rights to mine federal land.

A new report [PDF] from the inspector general of the Interior Department reveals that the Bureau of Land Management routinely underestimates the value of coal, letting companies like Peabody and Arch Coal snap up federal mining rights for a song, often with little or no competition. More than 80 percent of coal leases up for auction in the past 20 years received only one bid, the report found.

The New York Times reports:

The report said that the process by which the value of the leases is computed is faulty, costing the government millions. At the current rate of coal leasing, the inspector general found, every penny-a-ton undervaluation costs the taxpayers $3 million.

Further, the Bureau of Land Management allows coal companies to expand their leaseholdings by as much as 960 acres with no competitive bidding and little oversight, the report says. The bureau has approved 45 such lease modifications since 2000 without adequate documentation, the report states, potentially costing taxpayers $60 million.

Allowing coal companies to pay bargain-basement prices for mining rights supposedly keeps coal-fired power cheap for Americans. But as we turn to cleaner and increasingly cheaper sources of energy, coal’s share of the electricity market is falling — from 50 percent to 40 percent over the past decade. That’s leading U.S. coal companies to ship their goods to Asia, where coal sells for four to seven times more than it does in the U.S., yet the BLM isn’t properly accounting for that higher export value, the report found.

Interior is conducting a separate investigation into whether coal being exported to Asia is properly valued by the BLM. Meanwhile, at the request of Congress, the Government Accountability Office is taking its own look at coal leasing programs.

Luke Popovich of the National Mining Association called the loss of value highlighted by the inspector general’s report a “rounding error” compared to the $2.4 billion in royalties and lease payments the government collected from the coal industry last year. Hardly. An independent study published in 2012 estimated that the BLM’s consistent undervaluing of coal cost the government $30 billion over the last 30 years. Add in all the hidden external costs of coal mining and production, and this is looking like a really terrible deal for taxpayers.

The BLM says it’s revamping it process and convening a task force to consider how it values coal leases. Green groups like the Sierra Club are unimpressed; they’re calling for a moratorium on all coal leasing on federal land.

Claire Thompson is an editorial assistant at Grist.

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Coal companies get sweetheart deals on federal leases, shortchange taxpayers