coal lease

Wyoming panelists: Federal coal lease program shortchanges states

2013-08-20T20:00:00Z 2013-08-20T21:12:13Z Wyoming panelists: Federal coal lease program shortchanges statesBy JOAN BARRON Star-Tribune capital bureau Casper Star-Tribune Online

CHEYENNE -- Panelists at a federal coal leasing forum on Tuesday said Wyoming and Montana are getting shorted financially by the program and called for swift changes.

Mark Squillace is a professor of law and director of the University of Colorado Natural Resources Law Center and Tom Sanzillo is director of finance for the Institute for Energy Economics and Financial Analysis. The two said the federal Bureau of Land Management is undervaluing the coal put up for lease, which is costing the states and federal government million of dollars in revenue.

Squillace and Sanzillo said the causes include a lack of competition in bids, a flawed BLM appraisal system and the exclusion of exported coal in setting the value of the federal coal lease sales.

The Powder River Basin Resource Council and the Western Organization of Resource Councils hosted the forum in Cheyenne. The two landowner advocacy groups and the panelists called for a moratorium on new coal sales pending the completion of investigations by the Department of Interior, the Government Accountability Office and Congress.

Squillace said he wrote a guest column for the Casper Star-Tribune in 1998 outlining what he saw as the problem with federal coal leasing.

"Somewhat disappointingly, nothing really has changed since that time," he said Tuesday during the forum.

Coal, he said, has lost its competitive edge to natural gas and wind, but less so in the Powder River Basin. Squillace said the Environmental Protection Agency's proposed regional hazing, or air quality, rules will depress the market even further.

Despite those dour conditions, Squillace said, the states should push for reforms to ensure they're receiving fair market value for their coal.

One step, he said, would be to recertify the Powder River Basin as a coal production region. Such a federal designation would put the BLM in charge of parceling out lease tracts of coal for extraction.

Currently, without such a federal designation, coal companies can define areas they want to lease and ask the BLM to open them to bid. As coal companies jostle together in the basin, such parceling allows companies to essentially cut out competition with the stroke of a pen.

Another step would be to set a minimum on bids, the panelists said. If a $1 per ton minimum, for example, had been set in 1991 on Powder River Basin coal sales, the coal bonus revenue would have totaled $2.6 billion more in revenue for the state and federal governments.

The low coal prices represent a huge subsidy for the coal industry, Squillace and Sanzillo said, but the problem has been masked because significant revenues are still coming in from federal coal leases.

Meanwhile, Squillace said the BLM's use of comparable sales in appraising federal coal lease lands is flawed. For example, the agency only uses comparable coal sales within the Powder River Basin to value the basin's coal, although that coal is shipped nationwide.

Another problem, he said, is when a company sells coal to an intermediary at a low Powder River Basin price and pays royalties on that price, then sells the coal to China at a much higher price.

The Congressional investigation may stop that practice, Squillace said.

Sanzillo said the coal companies have profit margins high enough to enable them to pay higher prices for the federal coal leases.

The state should say, "You're cheating us. Stop it or there's going to be hell to pay," Sanzillo said.

Among the couple dozen people who attended the forum was Marion Loomis, president of the Wyoming Mining Association.

After the meeting, Loomis said that what the speakers said made no sense to him.

"The industry is struggling and their answer is to increase the cost to the industry that's struggling," Loomis said.

The forum was held in advance of a BLM lease sale scheduled for Wednesday for the Maysdorf II North lease, which will likely expand the Cloud Peak Energy's Cordero Rojo mine south of Gillette.

Contact capital bureau reporter Joan Barron at 307-632-1244 or joan.barron@trib.com

Copyright 2015 Casper Star-Tribune Online. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(3) Comments

  1. Pops
    Report Abuse
    Pops - August 21, 2013 7:55 pm
    Dirty fuel is just part of the death of the planet issue. It takes a global effort to stop what we have all squandered. It may be too late to reverse the damage.
  2. Rawhide
    Report Abuse
    Rawhide - August 21, 2013 6:14 pm
    Yes ken your right on the money...so many things these greenie bunny huggers have screwed up....the unintended consequences is what it's called...it started with logging 30+ years ago....it's A to Z now...coal,wolves,horse slaughter,etc,etc...the list is endless,,,the cost to consumers is atrocious...but these greenies don't care...as long as OTHER people take care of the environment their happy...ever notice a state or federal park where greenies congregate...it's always so trashy after they leave...
  3. ken
    Report Abuse
    ken - August 21, 2013 11:51 am
    How much do you want to bet that Squillance & Salzillo from the Colorado Natural Resource Law Center are nothing more than a bunch of Obama loving, coal hating, squirrel hating liberals. You have to believe that the singular agenda of this bunch of lawyering clowns is to get rid of coal for electricity (40% of electricity comes from coal) destroy jobs and wreck our economy. In the mean time our air is barely breathable because oh yea, these environmental justice fools have saved our forests by burning them all up. What hypocrisy!
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