U.S. Interior Department Rejects Bid for Powder River Basin Coal Lease

Coal Market Failing to Provide Fair Return for American Public; 462 Million tons of Coal Rejected in Last Month

Cheyenne, WY—A bid for a federal coal lease in the largest coal producing region in the nation was rejected by the U.S. Interior Department late yesterday because it failed to provide a fair return for the American public. 

The rejected bid comes on the heels of an unprecedented federal lease sale in Wyoming last month that was canceled by the Interior Department because no bids were received.  In total, industry plans to strip mine 462 million tons of coal have derailed in the last month.

“Our clean energy future and the prospects for our climate continue to get brighter,” said Jeremy Nichols, WildEarth Guardians’ Climate and Energy Program Director.  “The simple truth is that the coal industry can’t afford to pay the true cost of more coal and even the Interior Department is finally recognizing this.”

The rejection came as the Interior Department was offering the Hay Creek II coal lease for sale, a 167 million ton lease that would have expanded Kiewit Corporation’s Buckskin coal mine in the Powder River Basin of northeastern Wyoming.  Kiewit submitted a bid of 21 cents per ton for the lease.  The last time a bid this low was submitted for a lease in the Powder River Basin was in 2001 and the Interior Department rejected it.  In the last several years, coal from the region has been selling for more than one dollar per ton.

The Powder River Basin of Wyoming is the largest coal producing region in the United States, fueling more than 200 coal-fired power plants domestically and increasingly fueling power plants overseas.  Coal strip mined from the region is linked to 13% of all U.S. carbon pollution, making the region a root contributor to global warming in America.

The rejected bid is another sign of the decline and instability of coal markets.  Last month, the Interior Department canceled its plans to sell the Maysdorf II coal lease because the company seeking the lease, Cloud Peak Energy, refused to submit a bid.  The 148 million ton lease would have expanded Cloud Peak’s Cordero Rojo mine in the Powder River Basin.  In a statement, Cloud Peak explained that investing in the lease was “not prudent.”

With the rejection of the Hay Creek II lease, industry plans to strip mine more than 462 million tons of coal have fallen by the wayside just in the last month, preventing the release of 800 million tons of carbon pollution.

“What’s happening in the Powder River Basin is a telling sign that coal is worth more in the ground than it is mined and burned,” said Nichols.  “We’ve crossed a tipping point that promises much-needed relief for our climate for the health and economic prosperity of our nation.”

By law, the Interior Department has to ensure a fair return to the American public when it sells federal coal leases.  The Department, through its agency, the Bureau of Land Management, at a minimum has to ensure that “fair market value” is recovered.  The proceeds from coal lease sales go to the U.S. Treasury, offsetting the burden on taxpayers.

“Fair market value” is not a break even point, but rather the level at which the a fair return can be recovered for the American public. If “fair market value” cannot be recovered, the Interior Department is barred from leasing.

The rejected bid, as well as last month’s “no bid” lease sale are further indications that the coal industry is unable to provide a fair return to the American public for federal coal.  This is consistent with reports from coal companies.  Three companies operating in the Powder River Basin, Arch Coal, Peabody Energy, and Alpha Resources, have seen their value (based on market capitalization) decline by up to 90% just in the last two years. 

Kiewit, which is a private corporation, has also scaled back its other coal mining endeavors.  In early 2013, the company halted construction of its new Haystack coal mine in southwestern Wyoming.

Despite these latest developments, Interior has expressed its intent to offer more than 3.1 billion tons of new coal leases in the Powder River Basin in the coming years.  In April of this year, WildEarth Guardians joined a coalition of environmental, landowner, taxpayer, and health groups in calling on the Interior Department to impose a moratorium on new coal leasing in the Powder River Basin because of the economic and environmental impacts.  The Department, as well as new Interior Secretary, Sally Jewell, have not responded.

“Interior may not be imposing a moratorium on new coal leasing, but the free market seems to be,” said Nichols.  “Still, Interior, and Secretary Sally Jewell, has to reset their priorities and stop trying to sell coal that in the end, will only cost the American public.”


 

All active news articles