Bill would temporarily suspend new coal leases until reforms are implemented

Washington (May 15, 2015) – In an effort to reform the broken federal coal program that is potentially costing taxpayers hundreds of millions of dollars, this week, Senator Edward J. Markey (D-Mass.) introduced the Coal Oversight and Leasing (COAL) Reform Act (S. 1340) to modernize the program to protect taxpayers and end noncompetitive leasing practices and other weaknesses in the leasing program. Recent investigations of the federal coal program, including a Government Accountability Act (GAO) report released by Senator Markey and a review by the Department of Interior Inspector General (IG) have found numerous deficiencies in the federal coal program. Many of these problems have persisted since the 1980s, such as a lack of competition for federal coal leases. It is unclear whether American taxpayers are receiving a proper return on the more than 400 million tons of coal produced from federal lands each year worth billions of dollars.
“The federal coal program is rife with sweetheart deals, outdated regulations and mine-sized loopholes,” said Senator Markey, a member of the Environment and Public Works Committee. “While the Interior Department has taken some steps to address the coal leasing process, we need comprehensive reform to ensure taxpayers receive a fair return on the sale of these publicly owned resources and the agency has the authority to ensure coal mining companies are following the law. Until reforms are put in place, American taxpayers will continue to pay the price and we will undercut the administration’s historic climate goals by subsidizing the extraction, export and burning of this federal coal.”
A copy of the COAL Reform Act can be found HERE.
Specifically, the COAL Reform Act:

  • Puts in place a temporary moratorium on new coal lease sales until the proper reforms have been put in place;
  • Eliminates the loophole that allows coal companies to avoid paying the upfront cost that coal companies pay for the right to lease federal coal, also known as bonus bids;
  • Helps determine the Fair Market Value (FMV) of coal leases by ensuring coal companies certify the accuracy of exploration data and that DOI consider independently verifying the data provided by industry;
  • Reforms the FMV process by ensuring that no lease sale is conducted until DOI has completed a FMV analysis that fully accounts for the export potential of public coal, and prevents DOI from accepting minimum bids that are below the FMV;
  • Makes the coal leasing process more transparent by requiring DOI to make public versions of appraisal reports and to put information on lease sales, high bids, royalty payments and revenue on its website so that it is accessible by the public;
  • Addresses tremendous lack of competition for federal coal lease sales by requiring the Secretary of the Interior to create a coal leasing plan, modeled after the offshore oil and gas leasing plan, to maximize competition for coal leases and the financial return for taxpayers and consider the impacts of coal leasing, production and development on climate change and the environment;
  • Increases the outdated minimum rental rate for coal leases;
  • Require the Bureau of Land Management to issue regulations to ensure consistent inspection and enforcement of coal mining operations; and
  • Increases enforcement capacity by allowing DOI to issue civil penalties to ensure that coal companies follow the law.

Last year, Senator Markey released a report prepared by the GAO that examined the federal coal program. Among other deficiencies, the GAO found that the vast majority of coal lease sales on public lands are not competitive. Roughly 90 percent of lease sales receive bids from only a single coal company and the vast majority of those opening bids from a single company – 83 percent – are accepted by DOI. The GAO review of the federal coal program requested by Senator Markey was the first since 1994, and the problems with federal lease sales stretch back into the 1980s.
The report by the GAO at the request of Senator Markey is available HERE and a summary of the GAO report prepared by Senator Markey’s office is available HERE.
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.