Confidential Interior Department data was leaked to the coal industry before last month's record-breaking sale of western coal rights in apparent violation of Interior policy, according to an internal department memorandum.
Interior policy strictly forbids advance disclosure of the minimum bids the department will accept from industry in competitive coal sales, several officials said. This is done to ensure fair competition and to prevent industry from lobbying to have them lowered, the officials added.
However, in a March 26 memo sent to Interior from its Casper, Wyo., field office, regional minerals manager Dwayne E. Hull warned: "The sale procedures may be compromised" because of premature disclosures. Hull said in the memo that minimum acceptable bids for the April 28 Powder River Basin lease sale "have been distributed by unknown parties and are in the hands of some industry, state and private individuals. . . . We do not wish to cause undue alarm."
The minimum bid levels were published in the Federal Register on April 1 along with the official notice of the lease sale. But Interior officials said advance release of the figures could have given certain companies an unfair advantage in preparing their bids.
The Interior memo did not mention which coal companies obtained the data or which officials released it. Its existence was first reported Tuesday by the trade weekly Inside Energy, a McGraw-Hill publication.
Interior is conducting an internal investigation to determine whether the leaks occurred and, if so, how, deputy assistant secretary David Russell said. "If we find that someone has been leaking this information, we will have his job," he said.
Interior officials said the alleged leak had no relation to their decision in mid-March to lower by $45 million the minimum bids for the three richest coal tracts. That change came as part of a larger decision to switch bidding systems to accommodate the shaky market in western coal, according to Russell.
Russell said the department scrapped its first set of minimum bids and embarked on an experimental bidding system because there was a shortage of useful market data. The only two sales of comparable coal were held when the western coal market was more robust, he said, making the figures unreliable. And figures from those two sales varied widely, Russell added.
Interior has come under sharp criticism from conservation groups for proceeding with the large coal sale in a slumping market, which led most coal companies to sit out the competition. Despite Interior's decision to lower the minimum bids, there were loud industry complaints that the figures remained prohibitively high. Of the 13 tracts offered for leasing, only three drew more than one bidder.
Secretary James G. Watt called the sale a "resounding success" because it produced a record in total high bids for any sale of federal coal--$54.9 million, but critics contend the government got less than it could have in a healthier market.
Disclosure of the memo about the leaks prompted a new round of criticism. "Could Interior have received more than $54 million for the tracts. . . ? We'll never know," Rep. Edward J. Markey (D-Mass.) said at a hearing this week. Markey, who chairs the House Interior subcommittee on oversight, called on Interior to withhold issuing final leases "until we know whether or not the sale was in fact compromised."
Spokesmen for Amax Coal Co. and Shell Oil-Mining--which placed the high bids for two of the richest tracts--said they received no advance data.
Deputy Assistant Secretary William (Perry) Pendley of Interior's energy and minerals section denied that the release of the figures affected the sale. "I never saw that memo, but even so, it was rendered moot by our decision to change the system," Pendley said.
The new bidding system used by Interior set "entry level bids," which coal companies were required to match or exceed. The bids are now being examined by geologists and economists to ensure that they amount to fair market value, as required by law.
Under the old system, the minimum bid was based on existing market data and was automatically defined as fair market value. The new system allows Interior to consider the size of the bids themselves, not just data from other sales, so lower bids could ultimately be accepted.