Donald Trump’s administration will be harming U.S. taxpayers if it halts a long-overdue review of the federal coal leasing program and fails to update a system that is supposed to deliver “fair market value” for fossil fuels produced on public lands, according to an analysis published last week by The Hill.
The review “ought to have broad bipartisan support,” writes Jayni Hein of the New York University School of Law and the Institute for Policy Integrity. “The federal coal program is riddled with corporate loopholes and stagnant fiscal terms that shortchange federal taxpayers, to whom the nation’s mineral resources belong. The fiscal terms of federal coal leases, like minimum bids and rental rates, have not kept pace with inflation. And royalty rates lag far behind those for other resources, such as offshore oil and gas.”
Yet the Trump team “has criticized Interior’s moratorium on new coal leasing while the current programmatic review is under way, and many believe that it will halt the review and back away from potential reforms.”
Hein warns that a decision to scrap the review “would freeze the program in the 1980s, with fiscal terms that fail to account for modern, more efficient production methods, and fail to account for the cost of environmental pollution that is borne by the public. Bidding for coal leases is required to be competitive, yet the majority of auctions held in the last decade were structured so that they had only one bidder.”
The alternative is to augment state revenues by boosting royalty rates at least 12.5%, while moving toward a more market-based bidding system that requires higher minimum bids and no longer allows companies to nominate tracts for purchase and sale.
“New fiscal terms should also be analyzed to determine whether taxpayers are receiving a fair share, and how revising terms would affect coal production volumes, and environmental outcomes like greenhouse gas emissions,” Hein writes. “The effect of such reforms would likely be to lower coal production on more marginal tracts where the cost of production is highest, shifting some of that production to natural gas, renewables, and increased energy efficiency and conservation.”