The federal government halted all new leases of federal lands to coal-mining companies on Friday as it went back to the drawing board to reform its lease sale system.
On a conference call with reporters, Interior Secretary Sally Jewell suggested the American owners of federal lands — taxpayers — may not be getting a fair shake when leasing land out.
“I think about how we can manage our resources to help drive our nation’s economy,” Jewell said. “That includes ensuring the federal coal program delivers a fair return to American taxpayers, and takes into account one of the most pressing issues of our time: climate change.”
Forty-two percent of American coal is mined from federal land. But in at least two reports, government auditors have criticized the leasing program.
Investigations found the government sold leases at below market value. In the critical Powder River Basin in the western United States, 80 percent of sales went to lone bidders.
“A system that was designed to be proactive on the part of the federal government, sort of setting the terms for how leasing was going to take place, became entire reactive to what the coal industry wanted,” said Mark Squillace of the University of Colorado Law School.
Today, that industry today is on its knees: Cheap natural gas has undercut it, for now. Clean air rules are making coal pricier, and global demand for U.S. coal at current prices is shot. Several large companies are in bankruptcy reorganization, including Arch Coal, the second largest mining company in the country.
So for now, a halt in new leases may mean little, as the market is full.
“The industry is just making too much coal for what this new normal is,” said industry analyst Kristopher Inton at Morningstar. “What we expect is this industry to sort of right-size itself, so that the production fits what demand is most likely to be.”
Down the road, Inton said, a new leasing system where prices reflect carbon pollution will likely render coal even less competitive.