Via E&E Publishing:

Wyoming Gov. Matt Mead (R) contends his state was “caught by surprise” by the Obama administration’s decision to halt federal coal leases and review the program, declaring that “coal miners and their families are at risk.”

In a 75-page letter last week to the Bureau of Land Management, as well as 4,179 pages of attachments, Mead called on the agency to end or at least quickly wrap up its programmatic environmental impact statement, or PEIS, process.

“The BLM needs to stop the PEIS, but at a minimum it needs to commit in writing what it has promised repeatedly, that the PEIS will be completed by January 15, 2019 and, completed or not, that the moratorium will expire on that date,” Mead said. “I will continue to oppose the administration’s unjustified approach to coal.”

Federal coal is financially critical to Wyoming, as it is to Montana — the two states where the reform of the federal coal leasing program will have the largest economic and societal consequences. In both states, half the revenue earned by federal coal leases goes back to state coffers. And both remain in limbo as industry and environmental groups dig in their heels on how the review should unfold.

Asked what the Department of the Interior should analyze in a soon-to-be-completed review, industry groups insist that the coal leasing program is already doing its job: that is, providing a fair return to taxpayers and cheap, reliable fuel.

Environmental groups assert that the review opens the door for the agency to fully analyze all facets of the program — especially the environmental costs, including those of carbon emissions from mining coal on federal lands.

In royalties alone, Montana gets about $500 million annually from coal sales. In Wyoming, coal brings in more than $1 billion annually to the state and local governments. That comes from a share of federal royalties after the coal is mined, a 7 percent state severance tax, property taxes, a share of rent payments paid to BLM, sales taxes and bonus bid payments. Much of that money is used to fund schools and roads.

Speaking at a June meeting in Billings, Mont., Bud Clinch, executive director of the Montana Coal Council, testified that the current three-year moratorium on new coal leases that is underway while the review is completed is “just another thinly veiled tactic in the war on coal.”

“Initially, this moratorium was to cease leasing and analyze if the federal government was getting fair market value for its leases,” he said. “Somehow, it has morphed into this massive all-inclusive analysis from soup to nuts.”

Climate change and other externalities are already analyzed each time the agency considers a lease, he said.

In their comments submitted last week to BLM, Earthjustice, the Sierra Club and the Defenders of Wildlife ultimately called on the agency to end the program entirely. They strongly urged that climate change impacts be accounted for, something they say would be an “unprecedented opportunity” for BLM.

“In sum, while comprehensive analyses of the federal coal program’s social, environmental, and economic consequences are critical to BLM’s evaluation of the need for program reforms, those analyses can point in only one direction,” they wrote. “BLM should end federal coal leasing.”

Enviros say cost of coal includes climate

Middle ground does exist. A White House Council of Economic Advisers report released in June modeled four scenarios in which the current 12.5 percent royalty rate for federal coal was raised. The council examined how the market would respond, what revenues would do and what impacts that would have on greenhouse gas emissions (ClimateWire, June 23).

Whether rates were raised to 17 or 29 percent, all scenarios would load federal coffers with hundreds of millions of dollars more in revenue and help the climate, the report found.

Similarly, in a three-page report released last week, nonprofit advocacy group the Mountain Pact argued that small increases to federal coal royalty rates could send a windfall of revenue to states with a heavy mining presence. The report cited figures showing that adding $2.50 to the cost of coal per ton could raise revenues $910 million by 2020 while decreasing coal production less than 1 percent.

Alternatively, without any reform, the report found that the financial impact of climate change — should the agency not reform the program — could devastate mountain communities.

If BLM considers raising royalty rates or adding a price on carbon to the price of coal, one way the extra money raised could be spent is through investment into carbon capture and sequestration technology or to help struggling coal communities retrain workers.

Connie Wilbert, director of the Sierra Club’s Wyoming chapter, said that at the very least, American taxpayers need to get a fair return for their federal coal. She said federal assistance for Western communities is absolutely needed.

But Wilbert said she doubts that the industry would remain operable if the true climate and other environmental costs — impacts from coal dust on health and clean water, for example — were added to the price of coal.

“I personally believe this, and Sierra Club believes this, and it is reflected in our comments, is that through this PEIS and through this analysis of all of the direct, indirect and cumulative impacts and the required analysis of the economics of that, if the coal companies are actually required to internalize and pay according to those costs, at the end of the day, it won’t be an economically viable option anymore,” she said.

Industry: Consumers will suffer

Industry has voiced staunch opposition to raising royalty rates.

“The domestic coal industry is suffering relentless regulatory and administrative attacks from the current administration and fierce competition from other domestic fuel sources coupled with depressed international prices,” stated comments submitted by coal company Cloud Peak Energy Inc. “These regulatory and economic challenges have led to an unprecedented number of coal company bankruptcies.”

In the Powder River Basin are coal giants Peabody Energy Corp., Alpha Natural Resources Inc. and Arch Coal Inc., all of which filed for bankruptcy in the last year.

Jonathan Downing, executive director of the Wyoming Mining Association, also rejected the idea that raising royalty rates could help struggling Wyoming coal-dependent communities. Instead, he argued that BLM should examine ways to speed up the coal leasing process, which currently takes on average between five to seven years.

“If you increase the cost of that coal, that’s going to in turn get passed on to the consumer,” he said. “I hope they don’t adopt what they’re proposing and take a serious look at trying to make the program more efficient and let us do our job, which is mine cheap, efficient energy.”

A spokeswoman for BLM said the agency hopes to release its report on what will and won’t be included in the comprehensive review by December. A list of participants and their comments will be included.

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