Markey: Report on Public Coal Leasing Shows Taxpayers Losing Money

Government’s federal coal sales uncompetitive, ignore exports, keep information from public;

 

Senator calls for temporary suspension of new lease sales until problems solved, says potential for $200m or more in taxpayer losses

 

Washington (February 4, 2014) – Three decades after improprieties in coal lease sales in Wyoming and Montana were revealed, similar noncompetitive practices persist to this day, potentially cheating American taxpayers and benefitting large coal mining companies. These findings are included in the first review of leasing practices for federal coal mining rights since 1994 by the Government Accountability Office (GAO), the investigative arm of Congress, which was released today by Senator Edward J. Markey (D-Mass.). Calculations done by Senator Markey’s staff indicate that hundreds of millions of taxpayer dollars have potentially been lost.

 

In light of the report and continuing problems with Powder River Basin and federal coal leasing practices, Senator Markey called for a temporary suspension of new sales of coal rights until the shortcomings identified by the GAO are addressed and taxpayers are protected.

 

The GAO report found that in nearly 90 percent of lease sales, only a single coal company submits a bid for coal mining rights, even though federal law requires that sales should be competitive among multiple companies. Yet even when competition does not exist, the Bureau of Land Management, which oversees coal lease sales, accepts these non-competitive bids 83 percent of the time. They do so despite the fact that the GAO found that when initial bids are rejected, companies always bid again and at higher levels. That could indicate that the rights may have higher value than usually accepted by the government.

 

The report also found that the increased practice of exporting coal from the United States to higher priced markets in Asia and Europe is not adequately factored into determining a fair price for public coal rights. U.S. coal exports have more than tripled over the last decade to 12 percent of total U.S. production in 2012 and coal mining leases can last for 20 years or longer, meaning that if exports aren’t being considered, taxpayers may lose out for decades to come. 

 

“These noncompetitive practices are costing taxpayers in Massachusetts and across the nation, benefitting just a few coal companies who may be leasing public coal resources at bargain basement prices,” said Senator Markey. “Taxpayers are likely losing out so that coal companies can reap a windfall and export that coal overseas where it is burned, worsening climate change. This is a bad deal all around.”

  

Other findings of the report include:

--BLM is using outdated coal lease sales to set the fair value for coal rights, including sales that happened more than 5 years ago. Some states do not even account for inflation when using the outdated lease information.

--The Interior Department is not independently reviewing the sales.

--BLM is not providing key information on its website or elsewhere to allow the public to assess the sales.

 

The full report can be found HERE and a summary provided by Senator Markey’s staff can be found HERE. The report was also released to Rep. Peter DeFazio (D-Ore.), the Ranking Member of the Natural Resources Committee because the original request from then-Rep. Markey occurred when he held that position in the House.

 

Senator Markey first asked GAO to review coal lease sales in 1982 when he was in the House of Representatives, following allegations of disclosure of pre-sale appraisal information and appraisal and sale procedures that failed to assure the public received a fair market value in coal lease sales in the Powder River Basin. The 1983 report that followed uncovered that the Reagan administration had sold public coal in the area for roughly $100 million less than it was worth. As a result of then-Rep. Markey’s investigation, numerous changes were recommended to the way that Interior leases the federal coal that belongs to American taxpayers.

Senator Markey also transmitted a letter to the Interior Department highlighting the problems raised in the GAO report that they feel must be fixed before conducting new federal lease sales. That letter can be found HERE.

 

Senator Markey also submitted a statement for the record in the U.S. Senate to further explain the context of the report. Excerpts from Sen. Markey’s statement are below:

 

“As part of its investigation, the GAO released two reports to me, one that is public and one that is not able to be made public. GAO kept one of these reports non-public because the Interior Department believes that the proprietary information contained in the non-public report could harm the integrity of future lease sales. I believe that increased transparency with these coal lease sales would increase the integrity of the process, not lessen it.

 

“Based on my staff’s examination of the materials, I believe that using appropriate market calculations and assumptions in some recent coal lease sales could potentially have yielded $200 million more for the American people, and possibly hundreds of millions of dollars more.

 

“It would be very helpful for the American people to be able to review this information. But even if that is not possible because of concerns about proprietary information, Senators should be able to review this information and debate it in order to ensure that taxpayers are protected.”