Will the Bureau of Land Management subsidize Peabody’s plans to export coal to Asia?


May 16, 2012

Peabody Energy, the world’s largest coal company, will be bidding on Thursday for the privilege to mine hundreds of millions of tons of taxpayer-owned coal on a tract of land in Wyoming’s Powder River Basin, hoping to score some bargain prices – so they can export much of it to Asia. Peabodys offer last time for the South Porcupine tract – $366.6 million for 400 million tons of coal, just 90 cents a ton – was rejected by the BLM as too low, and a new auction was set for May 17.

This auction comes as the Bureau of Land Management is coming under increased scrutiny for subsidizing coal mining companies like Peabody at the expense of US taxpayers, ignoring the huge amounts of global warming pollution that will be generated when the coal is burned, and failing to account for Peabody’s plans to export increasing amounts of this US coal to foreign markets.The BLM’s role is critical because unlike other regions such as Appalachia, Powder River Basin coal is mostly owned by the federal government, and BLM is supposed to ensure that coal development there “is in the best interests of the Nation.” But without proper oversight, the BLM has been offering this federal coal to companies like Peabody, Arch Coal, and Cloud Peak Energy for bargain rates. Over the last 30 years, this has amounted to a $28.9 billion subsidy to the coal mining industry and helped coal maintain its large share of US electricity generation by keeping coal prices artificially low, as explained in a report and legal brief by Tom Sanzillo of the Institute for Energy Economics and Financial Analysis. These low prices have also helped the Powder River Basin soar from just 5% of US coal production in 1970 to almost half today – even though the Federal Government no longer classifies the region as a coal-producing region. If this sounds absurd, thats because the BLMs process for leasing US coal is skewed to benefit coal mining companies, lacks proper oversight and public participation, and is basically corrupt – check out the Wild Earth Guardians for more info.

Coal mining in the Powder River Basin, photo courtesy of Paul K Anderson

This scandal is getting more attention from elected officials, and Representative Ed Markey last month called for a review of the BLMs coal leasing program in the context of lowered estimates of economically recoverable coal in the Powder River Basin as well as the coal industry’s efforts to sell increasing amounts of US federal coal to foreign markets. Markeysletter insists that, American taxpayers must be assured they are receiving the full value for energy resources held in the public trust, especially when mining companies are seeking to export hundreds of millions of tons of coal for premium prices.”

Indeed, Peabody CEO Gregory Boyce’s own statements reveal the company plans to export increasing amounts of US coal abroad, seeking those premium prices. Boyce told investors last year that Peabody could make more money selling Powder River Basin coal if it is able to build a coal export terminal in Washington: “We see the long-term export potential, particularly with the developments at the Gateway Pacific Terminal and the increasing environmental rules in the US as to, once again, provide potential uplift for PRB in terms of volumes and margins.” Last month Boyce explained to investors that “when we look at an increase in exports, most of that is probably coming from new thermal exports out of the Illinois Basin, Powder River Basin.”

Peabody CEO Gregory Boyce is confronted with coal by youth climate activists

Although Boyce and his fellow coal mining CEOs have tried to present a rosy picture of the prospects for their export plans to their financiers at Bank of America, JP Morgan and Goldman Sachs, in reality these companies are facing stiff resistance from communities in Oregon, Washington, Idaho, and Montana that would suffer the economic, environmental, and health impacts of these coal export schemes. Oregon Governor John Kitzhaber expressed many of these concerns in his call to the Bureau of Land Management and other federal agencies for a sweeping review of plans to export coal from Pacific Northwest ports. In his letter, Kitzhaber insists that a comprehensive environmental impact statement must be prepared before regulatory or additional coal leasing decisions are made.”

So will the BLM heed Governor Kitzhabers calls and stop leasing coal until a thorough federal review examines the impacts of increased US coal exports? Will it begin to reform as the GAO reviews its coal leasing process? Keep in mind that in its Record of Decisionfor the South Porcupine lease, the BLM justified the decision by asserting that doing so would help meet the national coal demand, and that The public interest is served by leasing the South Porcupine LBA tract because doing so provides a reliable, continuous supply of stable and affordable energy for consumers throughout the country. At a time when coals share of US electricity generation has dropped 19% in one year to just 36%, and Peabodys CEO is touting plans to profit from the global coal supercycle, even the twisted logic of BLMs coal leasing process falls apart. How exactly is it in the best interests of the Nation to sell coal that belongs to US taxpayers at a discount so Peabody can strip mine and ship it to Asia?

Whatever happens with this particular coal lease, its clear that the BLM will no longer be able to continue its fire sale of US coal without scrutiny. Senator Bernie Sanders and Representative Keith Ellison have introduced the End Polluter Welfare Act which would require the BLM to do a fair market value study and designate the Powder River Basin a coal-producing region, as well as end a host of other subsidies to the coal and oil industries. And the Sierra Club and Wild Earth Guardians have filed a lawsuit challenging the BLMs failure to consider the enormous amounts of global warming pollution that would come from mining and burning the coal from this and other nearby coal mines. In response to the lawsuit, a BLM spokesperson told the Associated Press, “We recognize that it’s going to be burned; we just don’t know where it’s going to be burned.”

Really? If the BLM doesnt know where this coal is going to be burned, how can it claim that selling it will help meet the national coal demand? Peabody hopes the coal is burned abroad, because that means higher profits – it doesnt need to pretend to be looking out for the best interests of the Nation. Perhaps its time the Bureau of Land Management take a closer look.


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