Mr. Peabody’s Coal Train Has Hauled It Away…

from Wildlife Promise

Coal Train

Coal Train

This week, Peabody Energy—the world’s biggest coal company—will be hauling away a massive taxpayer subsidy when they secure the rights to mine the North Porcupine Coal Tract in the Powder River Basin from the Bureau of Land Management (BLM). This is not a new way of doing business for the BLM; this is standard operating procedure for their federal coal leasing program.

On Thursday, June 28, the BLM will “auction” off the 721.2 million tons of coal in the North Porcupine Coal Tract, a 6,364 acre area on the Wyoming side of the Powder River Basin, the region that produces the largest amount of coal in the nation. The leasing and burning of this coal would add another 1.1 billion metric tons of CO2 emissions to the atmosphere. This auction follows Peabody’s lease of 402 million tons of coal in the South Porcupine tract. Both tracts are to expand the company’s North Antelope Rochelle mine, of the of the largest coal mines in the United States.

There are numerous problems with this system that allow coal companies to reap exorbitant profit off of publicly owned resources.

Competitive Bidding?

The definition of an auction is the sale of property to the highest bidder. How can there be an auction when there is only one bidder?

If you are the BLM, in charge of the Nation’s taxpayer-owned coal, the word auction means selling property to a single bidder. This non-competitive nature of the federal coal leasing program has led to coal companies securing the public’s coal at rock bottom prices and then turning around and selling the coal for a huge profit. For example, in the most recent BLM coal lease in the Powder River Basin reference above, Peabody paid $1.11 per ton for the South Porcupine tract. They, in turn, will sell that coal for between $80 – $122 per ton.

The “lease by application” process that the BLM follows is simple. A coal company nominates an area for leasing, and then the BLM auctions it off to the same firm. As reported by Juliet Elperin in the Washington Post, “In the 26 coal leases the federal government has awarded in southeastern Montana and northeastern Wyoming since 1991, 22 have gone to a single bidder. In the other four instances, there were only two bidders involved.”

In a new report entitled The Great Giveaway, the Institute for Energy Economics and Financial Analysis estimate that the government’s longtime practice of auctioning coal mining rights to a single bidder may have cost taxpayers as much as $28.9 billion over the past 30 years.

America’s Energy Security?

Wyoming Coal Mine

Coal mine in Wyoming's Powder River Basin - Photo Credit Bureau of Land Management

In the Record of Decision justifying this coal lease, the BLM erroneously states that the coal mined in the Powder River Basin will be burned in the United States. The BLM High Plains Manager stated: “The public interest is served by leasing the North Porcupine LBA tract because doing so provides a reliable, continuous supply of stable and affordable energy for consumers throughout the country.” However, BLM spokeswoman Beverly Gorny recently said ”We recognize that it’s going to be burned; we just don’t know where it’s going to be burned.”

The BLM must know that this coal is destined for an export market, because the coal companies do not hide this fact. The coal industry is planning on dramatically expanding exports of taxpayer-subsidized Powder River Basin coal to Asia. For instance, Peabody CEO Gregory Boyce told investors last year that Peabody could make more money selling Powder River Basin coal if it is able to export it to Asian markets:

“We see the long-term export potential, particularly with the developments at the Gateway Pacific Terminal and the increasing environmental rules in the U.S. as to, once again, provide potential uplift for PRB in terms of volumes and margins.”

At the same time, U.S. coal consumption is declining rapidly. The Environmental Impact Statement that the BLM has used to justify this lease, states that coal-fired electric generation would represent up to 58 percent of the electric generation portfolio by 2030. In fact, the opposite is happening. Coal-powered electricity generation had plummeted to 34% in March 2012. The BLM is failing to acknowledge a new reality: coal use has been declining in the United States for years and will continue to do so as utilities switch to renewable energy, increase natural gas production and we as a country become more energy efficient.

Changes coming to the coal leasing program

This fundamentally flawed system that bilks taxpayers out of billions of dollars is now getting more attention from elected officials and the Governmental Accountability Office (GAO). Although it is probably too late for the North Porcupine Tract, the coal leasing program is being reviewed by the Interior Department’s inspector general and also will be the subject of an audit by the Government Accountability Office.

Before I wrap this up, I want to be absolutely clear—the government is practically giving away coal, owned by the United States taxpayers, to huge corporations so they can ship it to Asia and make a huge profit at the expense of our climate, wildlife habitat and your pocketbook.

Please thank Representative Edward Markey whose April 24 Letter prompted the first GAO review of the program in three decades.