As the Department of the Interior considers the future of the federal coal leasing program, it’s worth noting what a success the program has been, how important it remains to mining states and communities and how essential coal remains in the nation’s energy mix.
The federal coal leasing program has provided hundreds of millions of dollars of federal, state and local revenue per year, while also providing a low cost, reliable and secure source of energy for all Americans. Thirty-seven states consume coal from federal leases to generate electricity and fuel industrial and commercial facilities. The coal produced from federal lands is essential to the nation’s energy security and economic competitiveness, especially in the wake of a global energy crisis and the troubling return of natural gas price volatility.
One of the clear lessons of the global energy crisis is the danger posed by policy that limits supply of essential fuels while demand remains as strong as ever. With global demand for fossil fuels continuing to grow – and with coal playing an outsized role in helping allies pivot from Russian energy – maintaining the federal coal leasing program, and the affordable, secure energy it provides, is critically important to the nation’s energy and economic future.
Coal is America’s most abundant energy resource—making up nearly 85% of U.S. fossil energy reserves on a Btu basis. And coal production on federal lands meets 40% of U.S. coal demand. That production also remains an economic pillar for mining states.
Coal mining provides employment of nearly 97,000 people and the creation of 3.2 jobs for every job in mining, for a total of more than 314,000 jobs nationally. In addition, coal-based electric power plants directly employ another 70,000 Americans. Coal industry jobs are high paying, with an annual average salary of a coal miner at over $93,000 – 38% above the U.S. average wage of $68,000. Coal generated $20 billion in sales and paid $8 billion in direct wages and salaries according to 2021 analysis by the NMA. The economic activity attributable to coal mining is also subject to billions of dollars in taxation at the federal, state and local levels.
The federal coal leasing program, specifically, has delivered more than $9 billion in federal, state and local revenues over the last decade, revenues critically important to state operations. For example, in 2020, the financial contribution from federal coal to Wyoming state and local governments in the form of taxes, royalties and fees was over $550 million – revenues that underpin education and school construction as well as highway maintenance and other county and city infrastructure projects.
Underpinning Dispatchable Fuel Diversity
The federal coal leasing program and domestic coal production aren’t just a regional success story. Coal remains an energy and economic workhorse for the nation, with a particularly important role to play as the nation tries to navigate an unfolding grid reliability crisis, surging electricity demand and a U.S. natural gas market increasingly shaped by gas-hungry buyers in Europe and Asia.
Last year was the most volatile on record for natural gas prices, raising the price of electricity, the cost to heat homes and the cost of manufacturing economic building blocks like fertilizer and steel. With the U.S. gas export capacity continuing to soar, global demand for gas will only play a larger and larger role in shaping domestic gas prices.
While much reduced by an ongoing regulatory onslaught, U.S. coal generating capacity and coal production are a critical hedge to gas price volatility, providing optionality in energy markets when gas prices spike or when gas supply is constrained.
And increasingly – when it’s needed most – gas supplies are constrained or altogether unavailable. As Bloomberg recently reported, “The grid’s newfound reliance on natural gas was for more than a decade hailed as a breakthrough. It’s now one of its biggest vulnerabilities.” The inability to get gas to generators during episodes of peak demand – particularly bitter cold when instrumentation and even gas flows freeze up – has become its own crisis.
Repeatedly, gas delivery systems and gas power plants are failing to perform when they’re needed most. Just last Christmas, the PJM grid, the nation’s largest, was pushed to the verge of rolling blackouts during a biting cold snap. As Bloomberg observed, “gas was largely to blame.” PJM saw 23% of its generating fleet shutdown on Dec. 24. Natural gas plants accounted for 70% — or 32 gigawatts – of the nearly 46 gigawatts of outages despite representing just 44% of the market’s total installed capacity.
“If you have assets that you can’t get fuel to, it’s useless,” explained Thomas Coleman, executive director of Grid Security Project and a former adviser to North American Electric Reliability Corp. “We have a broken system, and it’s threatening our national security and it’s threatening our economic viability.”
The fuel security and reliability of the coal fleet – backed up by robust domestic coal production – provides the essential dispatchable fuel diversity that time and again bails out grids when other sources of power falter.
The federal coal leasing program is the cornerstone of the nation’s fuel security, energy affordability and our grid reliability. Moving forward with continued leasing – and a program that clearly works – should be an easy decision.
- On June 28, 2023