UPDATE March 29, 1:40 p.m.: According to a press briefing with Interior Secretary Zinke, the formal review of the federal coal leasing program launched by the previous administration has in fact been scrapped (contrary to what the post below anticipated). It is a much more significant change than the lifting of the moratorium. Here’s a post on what it means.
In January 2016, the Department of Interior placed a temporary moratorium on the leasing of federal land to private companies for the purposes of coal mining.
Today, President Trump signed an executive order that, among other things, reversed that moratorium.
Will it matter? Eh. Not really.
The resumption of federal coal leasing won’t boost short-term coal production. It won’t slow, much less halt, the ongoing decline in coal mining jobs, or affect the price of electricity. It will do nothing for the coal miners to whom Trump has so vigorously pandered. All it may do is subsidize the future profits of a few coal company executives.
Like much of Trump’s record so far, it is almost comically plutocratic policy smeared with a thick sheen of populist rhetoric.
To understand why this particular aspect of Trump’s new EO is such a nothingburger, let’s get some context.
There’s a moratorium because the federal coal leasing program is under review
DOI placed a moratorium on new coal leases last year because it was launching the first comprehensive review of the federal coal leasing program in three decades.
It was clear to all concerned that the result of the review would be higher prices for leased land. It would be silly to allow coal companies to race to buy up a bunch of artificially cheap leases before the review concludes. Thus the moratorium.
The coal leasing program is a big deal because roughly 40 percent of coal produced in the US comes from federal land. The government leases tracts of public land — primarily, but not exclusively, in the Powder River Basin, in Montana and Wyoming — to coal companies, which mine it and sell the coal at a profit.
For years, critics — including the government’s own General Accountability Office and the Interior inspector general — have been saying that the leasing program is outdated, poorly run, and a bum deal for taxpayers. (If you want the full scoop, read Brad Plumer’s backgrounder, or this report from the Center for American Progress.)
The short version is: Leases are often sold at auctions with only one bidder, at ludicrously below-market prices, and do not take into account the leased coal’s environmental impacts, including its impact on climate change.
By selling its coal at bargain-basement prices, the US public is effectively subsidizing coal companies — to the tune of, according to one study, $28.9 billion over the past 30 years.
And that’s just the difference between leasing prices and average market prices. It’s to say nothing of what the leasing price would be if the impacts of the coal’s carbon emissions were taken into account.
Subsidizing coal companies to mine coal has been, to say the least, at odds with US environmental policy, which seeks to reduce air local pollutants and greenhouse gases. Coal is a serial offender on both counts.
Last year, in response to such criticisms, then–Interior Secretary Sally Jewell launched a formal, comprehensive review of the program — a Programmatic Environmental Impact Statement (PEIS) under the National Environmental Policy Act (NEPA), to be specific. You can read about it here.
The full PEIS is expected to take three years. At this point, DOI is roughly a year into it. This past January, with the help of hundreds of thousands of public comments, it released a report, which diagnosed the problems with the leasing program and laid out a road map for the reform process.
The report detailed “the need for modernization” aimed at “ensuring a fair return to Americans for the sale of their public coal resources, assessing the structure and efficiency of the coal program in light of current market conditions, and considering impacts on communities and the environment including climate change.”
It also identified a number of reforms that would be taken “in the near future,” including increased transparency and adjusted rates.
Anyway, the review process is ongoing. While it is ongoing, the DOI had resolved not to issue any new leases, because “it would not be responsible to continue to issue new leases under outdated rules and processes.”
That’s the moratorium Trump just lifted.
Neither the moratorium nor lifting the moratorium matters much to coal production
DOI was confident that the pause on new leases would have no impact on production, prices, or power reliability. “Based on current production levels,” the agency wrote last year, “coal companies now have approximately 20 years of recoverable coal reserves under lease on federal lands.”
And 20 years of reserves hadn’t proven sufficient, the moratorium also contained provisions allowing for “emergency” exceptions for any mine that ran short.
Production won’t increase after the moratorium because the moratorium wasn’t really holding any back. Now that it’s lifted, “the small number of pending leases held up by the moratorium will likely move forward after BLM completes their environmental reviews,” says Dan Bucks, former Montana director of revenue, but they “are too few and too modest in coal volume to have any lasting market significance.”
The amount of land leased to coal companies has been steadily declining for years. Due to coal’s recent battering, the DOI reports that many current lease applications “are on hold at the companies’ request due to reductions in market demand for coal.”
In short, it’s unlikely much new land was going to be leased in the next several years, no matter what DOI’s policy.
Now, however, there’s a window of opportunity for coal companies. Lifting the moratorium, says Jayni Foley Hein of the Institute for Policy Integrity, “will allow new lease sales to go forward using the same outdated minimum bids, rental rates, and stagnant royalty rates that have been used for decades.”
It’s a sweetheart deal, and it will only last until the PEIS is done. After that, leasing will get more expensive. This perverse incentive “could result in the coal industry proposing a significant number of new leases,” says Bucks, “largely to secure unjustified subsidies for future coal reserves.”
Coal companies may hedge their bets by buying up leases while they’re cheap. But they’ll just sit on those leases until they need them. It won’t result in any new productions or jobs, just a nice bit of future pocket padding for coal execs.
The real issue is the review of the leasing program
The issue of lasting significance is not the moratorium but the PEIS process itself — whether the reforms that Jewell put into motion will be carried forward by new Interior Secretary Ryan Zinke.
Serious leasing reform could substantially reduce US carbon emissions. (If the US took its long-term carbon targets seriously, it would leave all the coal in the ground.) Any foreseeable reform wouldn’t be enough to make up for the loss of the Clean Power Plan, but it would make a dent. It might be the only carbon-reduction policy Trump hasn’t gone after directly yet.
Yet. Thus far, no official statements have been made on the PEIS. Zinke has said some vaguely supportive (if also confusing) things about the review (he wants to make coal leases less like “junk bonds” and more like “AA bonds”), but other than that, there’s little indication where the review process will go under the new administration. “He’d have a good reason” to go forward with the review, “considering that two-thirds of Americans support reforms to the federal coal program,” says Nicole Gentile of the Center for American Progress, “but I’m not sure we have much insight on what he meant.”
The steep budget cuts that Trump intends for DOI (10 percent, reportedly) do not bode well for any of its internal initiatives, but Zinke has said he will fight those cuts. As always with this bunch, who knows?
It is revealing that Trump wants to resume a program the government itself says is ripping off taxpayers. But it’s ultimately a sideshow.
The PEIS is the prize. It could define the government’s approach to coal on federal land for another 30 years, determining whether generations of taxpayers are fairly compensated for the value — and the mounting long-term costs — of the coal on their shared land.