Today, Sightline is releasing a new report on the US Bureau of Land Management’s coal leasing programs: Unfair Market Value: By Ignoring Exports, BLM Underprices Federal Coal. As the report documents, coal companies operating in the western United States are buying coal from the American public with the explicit goal of shipping that coal overseas…yet the BLM is ignoring the potential profits from coal exports when setting its prices. As a result, the agency is giving away publicly owned coal for a song—boosting coal company profits, while denying the American public of millions of dollars of revenue each year. For details, read on…
Perhaps you may have seen some of the mile-long coal trains that are now plying the rails in the Pacific Northwest, carrying coal to export terminals to be shipped to Asia. And perhaps you’ve even paused to wonder how those companies got hold of all of that exportable coal in the first place.
As it turns out, there’s a simple answer to that: if you’re a US citizen, they got that coal from you.
The American public, you see, owns vast deposits of coal throughout the western United States. Most of the coal in the Powder River Basin, for example, is owned in common by all Americans. The same is true for major coal deposits in Colorado, Utah, New Mexico, and other states. The coal companies don’t own it: you do.
If coal companies want to mine that coal, they’ve got to go through the US Bureau of Land Management’s (BLM) coal “leasing” program, which gives private companies access to public coal in exchange for leasing payments, royalty payments, and compliance with some basic environmental requirements.
But here’s the thing: the BLM gives away federal coal for a song—sometimes just pennies per ton. And what’s worse—as documented by Sightline’s latest report, Unfair Market Value—BLM almost completely ignores the potential profits from coal exports when deciding on the minimum price it will accept for federal coal.
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Many coal companies have been very explicit with investors and regulators about their plans to boost coal sales to overseas customers. In many cases, they’ve even identified the specific mines that will supply the export markets. Some of these companies hope to lease new supplies of coal from BLM, with the stated intent of exporting this coal to Asia.
Without the Asian market, many of these companies simply would not be interested in leasing federal coal at all. But with the Asian market, they believe they can reap significant profits from coal mining.
Yet even so, when deciding on the so-called “fair market value” of federal coal—the lowest price that BLM will accept for a bid on federal coal—the agency essentially ignores the export market. Despite all evidence to the contrary, BLM continues to assume that coal will be sold domestically.
If you’ve been looking at the stock performance of some of the big US coal producers, you’ll see that selling coal domestically has been deeply unprofitable of late. So assuming that coal will be sold domestically, where profits are slim, rather than internationally, where profits sometimes can be much higher, is tantamount to a giant subsidy to private coal companies. It’s a giveaway, pure and simple: when BLM ignores the economics of coal exports, the American public winds up selling a valuable resource at bargain basement prices. That boosts profits for coal companies…but shortchanges the American public by millions of dollars each year.
For all of the gory details, read the full report: Unfair Market Value: By Ignoring Exports, BLM Underprices Federal Coal.