Coal-fired debate over the federal coal program

Coal-fired debate over the federal coal program

Coal industry members, environmentalists and state and local officials all gathered in a Marriott hotel conference room in Golden on Tuesday to weigh in on how the Bureau of Land Management should modify the federal coal program — if at all.

It was the fourth of five stops on the BLM’s national listening tour, designed to solicit input on how to best ensure that taxpayers get a fair return on the coal extracted from public lands. The tour comes on the heels of Department of the Interior Secretary Sally Jewell’s call to “modernize the federal coal program.”

Around 50 people gave remarks crammed into a three-hour public comment period. Another 20 or so people were turned away. The time was split according to constituency — with public officials speaking first, then coal industry backers, then the anti-fossil-fuel crowd.

Participants debated whether the BLM should raise royalty rates for coal extracted on federal land. The royalty rate is a tax that coal companies pay to the federal government to be distributed back to the states for things like roads, bridges, schools, etc. A portion also goes to the U.S. Treasury. Currently, the rate is set at 12.5 percent of the gross value of the coal produced for surface mining and 8 percent for underground mining.

Of the approximately 570 million acres of federal land leased out for coal mining, 88,677 acres are in Colorado, according to the BLM. The agency reports that in 2014, the 55 active coal leases on that land generated $42 million in royalty revenue and accounted for just over 5,000 jobs in the state. All told, the BLM estimates that coal production on public land contributed $721 million to Colorado’s economy last year.

So the question is: Are Colorado taxpayers seeing a fair share of that return?

Coal backers who spoke at the listening session argued the industry is already forking over plenty to the federal government.

Deck Sloan, senior vice president of strategy at one of the nation’s largest coal producers, Arch Coal Inc., opened his remarks by declaring “the federal coal program is working and working well.” His company actually pays an effective royalty rate upward of 20 percent, Sloan said. “It’s hard to see how anyone could argue that’s not a good deal for taxpayers.

A 2013 study by the Government Accountability Office states Colorado’s effective royalty rate — what lessees actually end up paying after allowances and reductions — is at 5.6 percent. According to another analysis by the independent research group Headwaters Economics, the royalty rate is at 4.8 percent. 

The discrepancy between those estimates and Arch’s has to do with the bonus bid coal companies pay to win leases and other loopholes 

Arch figures it bids around $1 per ton, but BLM data shows that in reality, coal companies have bid an average of $0.23 per ton to win coal leases on federal lands since 2000. And that’s because it’s hardly a competitive process — the GAO report found that since the inception of the coal-leasing program, 90 percent of sales involved a single bidder. 

The pro-coal camp also charged their detractors with bad faith.

The environmentalist-backed Obama Administration already has it out for coal, coal advocates argued, pointing to heightened environmental regulations, emissions standards and incentives for renewable energy. Higher royalty rates would be the latest front in the war on coal, waged to drive the industry out of business altogether.

President of the Colorado Mining Association Stuart Sanderson took that tack, blaming environmental regulations for the mine closures and job losses that have plagued the industry in recent years.

“The government refuses to acknowledge its own role in rising costs,” Sanderson said about coal’s decline. “Lower production means a lower royalty, and zero production means zero royalty.”

But royalties weren’t the only topic discussed.

Keith Baker, a trustee for the town of Buena Vista, said that in recent years, his Western Slope community has seen a shrinking snowpack, retreating timber line, shorter ski season and dried up irrigation reserves — the visible and tangible effects of climate change.

“Coal does have a cost, and we’re seeing that,” Baker said. “Our small communities are having to deal with it.”

Many who spoke echoed Baker’s concerns about the environmental impact of coal production and advocated for federal policies to hasten the transition away from fossil fuels.

“Mining takes place in some of the West’s most important fish and wildlife habitats,” said Aaron Kindle of the National Wildlife Federation, highlighting the precarious fate of Colorado’s sage-brush grouse.

Part of the BLM’s responsibility to ensure coal production that’s fair to the public should be to “provide funding to properly restore our Western landscapes,” Kindle said.

Several environmentalists took on the economic impacts of coal royalties.

“When some coal companies use corporate subsidiaries to artificially lower royalties paid to the federal and state governments, they not only cheat the citizens, they also gain an unfair advantage over competitors,” said Peg Perl, senior counsel at Colorado Ethics Watch.

Perl and others referenced a number of different breaks that coal companies catch in the leasing process.

For starters, the BLM only thinks domestically when assessing the fair-market value of a lease, even though coal is fetching higher prices abroad. So when companies boost profits by shipping their product overseas — but pay taxes as if they’re not — taxpayers miss out on the revenue that could’ve been.

Another common practice in the industry is for coal giants to sell to a subsidiary company at a low-ball price, then have that subsidiary turn around and sell high. The BLM’s routine royalty-rate reductions on leases that only one company bids on needlessly rip off taxpayers, the program’s critics charge.

Perl took a step back from the nuts-and-bolts of it all to ask a more general question about the sway that the coal industry has on government policy. Data complied by opensecrets.org, a government transparency project, shows that the coal mining industry spent around $43.6 million on lobbying since 2012.

A smattering of environmentalists also showed up before the listening session to protest outside.

“BLM: stop the coal giveaway!” read one sign.

“Keep fossil fuels in the ground” read another.

Coloradans who could not attend the listening session but still want to offer their 2 cents can do so by emailing BLM_WO_Coal_Comments@blm.gov. The public comment period ends September 17.

 

Photos by Aaron Weiss. 

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About the Author

Nat Stein

Nat Stein is a Denver-based reporter. Check out her other work at Cipher magazine, KRCC public radio, Jacobin magazine and In These Times.

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