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WildEarth Guardians Calls on Interior Department to Cancel Illegally Sold Federal Coal Leases

Oversight Reports Released Last Week Found Coal Sold at Below Market Value, Contrary to Law

Denver—WildEarth Guardians today called on the U.S. Interior Department to cancel more than a dozen federal coal leases, primarily in the Americna West, which oversight reports last week found were sold at below fair market value, contrary to federal law.

“This is an absolute scandal.  It’s bad enough the Interior Department is selling millions of tons of coal at a time when we should be doing everything possible to curtail carbon, now we come to find they’ve been selling coal illegally,” said Jeremy Nichols, WildEarth Guardians’ Climate and Energy Program Director.  “This isn’t just a violation of law, it’s a violation of public trust, and it behooves Interior to swiftly fix these past mistakes.”

A report released February 4, 2014 by the U.S. Government Accountability Office and a previously unreleased November 15, 2013 letter from the U.S. Department of Interior’s Inspector General, released February 6, 2014 by the U.S. Senate Energy and Natural Resources Committee, roundly criticized the Bureau of Land Management, the Interior Department agency charged with managing federal coal, for failing to ensure leases were sold at fair market value, as required by the U.S. Mineral Leasing Act.

The Inspector General identified several instances in Colorado where coal leases were sold below fair market value in violation of law, including a 3.2 million ton lease sold to Peabody Coal in 2012 and a 92 million ton lease sold in 2007 to Colowyo Coal, a subsidiary of Western Fuels Association.  IG Letter at 2.

There were at least 16 other instances identified by the Inspector General where coal leases were sold below fair market value, including in Colorado, Montana, New Mexico, Oklahoma, and Wyoming.  In one case, a lease was sold in Wyoming for $12.39 per acre, yet federal law requires a minimum charge of $100 per acre.

An independent report released in 2012 found that undervaluing federal coal may have cost taxpayers nearly $30 billion since 1990.

Despite the findings last week, the Bureau of Land Management has made no public commitment to remedy its past misdoings.  In a letter sent today to Director, Neil Kornze, WildEarth Guardians called on the Bureau to confront its past failures by canceling illegal leases and by suspending future lease sales until the problems identified by the Government Accountability Office and Inspector General can be fully addressed.

“The Bureau of Land Management can’t legitimately keep leasing federal coal while it refuses to make right its past wrongs,” said Nichols.  “Any instance of federal coal sold illegally is a mark against the integrity of the Bureau.  The only way to restore integrity is by acknowledging mistakes and taking every step possible to remedy them, including canceling illegal leases.”

The Government Accountability Office found in its review that the Bureau of Land Management inconsistently appraises federal coal and often fails to comply with its own economic evaluation handbook when selling coal leases.  Among other things, the report found that the Bureau is failing to take into account coal exports when appraising coal, even though companies are fetching premium prices by selling American coal overseas.

The Bureau of Land Management’s Colorado office was explicitly singled out as failing to take into account coal exports, even though Arch Coal, the owner of the West Elk mine, announced last week in an earnings call that it exports half of the coal it produces in Colorado.

The reports indicate the problem of illegal federal coal sales may be more widespread.  The Inspector General, for example, noted that in two recent coal leases sold in Wyoming, the Bureau of Land Management assessed fair market value based on lower priced bids, rather than higher actual sale prices. 

The Inspector General also found that several state Bureau offices, including Colorado, New Mexico, and Utah, illegally negotiated with coal companies when selling coal.  In its letter, the Inspector stated that negotiations are prohibited by federal law, noting that such a practice “would necessitate a change to the law and regulations.” IG Letter at 5.

In its letter, WildEarth Guardians specifically calls on the Bureau of Land Management to undertake seven actions to review and remedy past coal leasing missteps.  In addition to canceling illegal leases, Guardians called on the Bureau to assess fair market value assessments for all coal leases issued in the last five years and to prepare a nationwide analysis of the environmental and economic impacts coal exports.


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