Unfair Market Value

By Ignoring Exports, BLM Underprices Federal Coal

Report: Unfair Market Value
Coal train, by Paul K. Anderson. Used with permission.

Coal train by Paul K. Anderson (Used with permission.)

As demand for coal in the United States has declined over the past several years, coal companies have focused on selling more coal to customers overseas, particularly in Asia. Many of these companies have found that coal exports can yield higher revenues and better profit margins than domestic sales, and are now seeking new sources of coal for export markets.

Coal companies operating in the western United States purchase much of their coal through federal coal leasing programs operated by the Bureau of Land Management (BLM), which allow private coal companies to mine and sell coal owned by the American public. Although a growing share of federal coal is exported to overseas customers, the BLM has almost completely ignored the value of export sales when determining the minimum price it will accept for federally owned coal. The failure to assess the economics of coal exports has led the agency to systematically underprice coal owned by the American public, potentially leading to millions of dollars in foregone revenue each year.

This report documents cases in which coal companies have purchased low-cost federal coal, and then resold it overseas at much higher prices. It also documents examples of coal companies that have clearly stated their intention to export even more federal coal in the future, including: Spring Creek Mine (MT), Decker Mine (MT), Signal Peak Mine (MT), Bowie Resource Partners (UT, CO), West Elk Mine (CO), Kinney Mine (UT), and mines in the southern Powder River Basin (WY).

Some energy market analysts even believe that exports have the potential to affect coal markets in more fundamental ways, by creating scarcity in domestic coal markets that could boost prices for domestic coal consumers. And as with all coal sales, coal exports carry significant costs for the climate, air and water quality, and human health – costs that are borne by the public, but are not incorporated into the price that private coal companies pay for federally owned coal.

Given the coal industry’s clearly stated intention to expand coal exports, federal officials now have both a duty and an opportunity to conduct a comprehensive review of the economics of coal exports when assessing the “fair market value” of federal coal sold to private firms.

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Read the press release here.

Published: July 24, 2014