Angry House and Senate Democrats yesterday accused the Interior Department of leasing federal coal reserves to industry at "rock bottom prices" in a recent record-breaking sale of U.S. coal rights in the west.

The controversial sale in the Powder River Basin of Montana and Wyoming came during a glut in the western coal market, and most of the 1.6 billion tons of coal was auctioned off without competitive bidding. One month before the April 28 sale, high Interior officials reduced by $42 million the minimum bids required from companies vying for the coal.

Interior officials testified yesterday that they made the change in hopes of increasing competition. But under questioning from House Interior Committee Democrats, they said they have been unable to find internal documents justifying it, other than a memorandum of one meeting where it was discussed.

Interior's Dave Russell, deputy director of the department's Minerals Management Service, said the change was made in Washington, without input from Interior economists in the field who had recommended the higher minimum requirements and without requests for public comment. He also said there is no established procedure for making such changes.

Interior Secretary James G. Watt was aware of the change, but did not take part in the decision, Russell said.

"In 30 days' time, two years of work of the Department of Interior was ash-canned and there's not one piece of paper to document it?" exclaimed Rep. James D. Santini (D-Nev.), a conservative who in the past has been hesitant to attack Watt. "In dealing with our public resources, we've got to be more deliberate than this top-of-our-heads, seat-of-our-pants approach."

Santini said the sale procedures are a sign of "at the very least, serious administrative ineptitude. Others have suggested that something is rotten in the state of Denmark."

Rep. Edward J. Markey (D-Mass.), chairman of the Interior committee's investigations panel, said, "In this age of hundred billion dollar deficits, the public has a right to know that our coal is not being sold at rock bottom prices."

Critics of Watt's pro-development policies have made the coal sale a focal point of their attacks. The sale generated a record total for any federal coal sale--$54 million--and Watt called it a "resounding success." But Markey, Santini and Sen. Dale Bumpers (D-Ark.), who also denounced the sale at yesterday's hearing, contend the government could have received far more money in a healthier market. The bid total merely reflects the fact that the government auctioned off a record amount of coal, these critics charge.

Interior's Russell and economist Jack M. Campbell testified that Interior still received a fair market value for its coal, as required by law. Despite the present glut, they said there was widespread industry interest in the coal in the months before the sale. They also said the consumer will benefit from having more coal on the market, a contention disputed by environmentalists.

Russell and Campbell said the lowered minimum bids were part of an overall switch in Interior's bidding system for coal leases. In the past, Interior set "minimum acceptable bids," representing the fair market value of the coal, and required all bidders to meet or exceed those levels.

In the present soft market, they said, Interior officials in Washington decided that the $94 million in minimum acceptable bids proposed by economists in the field might have "chilled" competition. They embarked instead on an experimental system, using "entry-level bids" of $52.2 million. Interior analyzed the bids after they were received, and decided that nine of the 11 high bids represented fair market value. Those leases were awarded last month.

Audrey Buyrn, who analyzed the bids for the Office of Technology Assessment, contested Interior's assertion that the new system increased competition. Of 13 tracts offered for sale, only three drew two bids, eight drew one and two drew none, she said.

The bidding was conducted orally, and on the three tracts that drew two bidders, competitors drove the high bid to 20 times the entry-level bid, she said. But on the eight tracts that drew only one bid, the price came to less than five percent above the entry level, she said.