Public lands and private coal

To everything, a beginning. The development of coal-export facilities, such as the proposed Gateway Pacific Terminal at Cherry Point, has its beginning in the insular world of single-bid coal leases.

According to the Government Accountability Office, in 2012 42 percent of the 1 billion-plus tons of coal produced in the Unites States were mined from coal tracts leased from the Bureau of Land Management’s federal coal-leasing program, largely in the Powder River Basin of Montana and Wyoming. A GAO report released Tuesday underscores the disjointed methodology of BLM bureaucrats when determining the fair market value of coal from the leased tracts.

There is an outrage factor because low-balling the fair market value rips off the American taxpayer, with lease revenue generated from royalties collected when the coal is sold.

The report also reveals a bureaucratic culture that, intentional or not, telegraphs a cozy public-private MO that positions Big Coal ahead of the public interest.

“GAO found that BLM did not consistently document the rationale for accepting bids that were initially below the fair market value, pre-sale estimate,” the report reads. “Furthermore, some state offices were not following guidance for review of appraisal reports, and no independent review of these reports was taking place.” BLM doesn’t tap a resource available to it for third-party reviews, namely the Office of Valuation Services, which, like the BLM, falls under the U.S. Department of Interior.

Last week Oregon Rep. Pete DeFazio and Massachusetts Sen. Ed Markey issued a joint statement. “Given the lack of market competition in coal leases, if the fair market value set by Interior is low, it can lead to significant losses for taxpayers. For instance, for every cent per ton that coal companies decrease their bids for the largest coal leases, it could mean the loss of nearly $7 million for the American people,” they write.

Over time, the loss to taxpayers has been in the $30 billion range.

Markey displays sober judgment, calling for a temporary suspension of the federal coal-leasing program. The GAO is more conservative in its recommendations, insisting on more than one approach when appraising lease values as well as ensuring greater transparency by requiring the program to publish information on its website about past lease sales.

In a few years, the long narrative that begins with single-bid coal leases on public lands, bolstered by East Asia’s big appetite for North American coal (and a corresponding domestic drop in demand), could spell 24 coal trains a day at a railroad crossing near you.

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