“It is abundantly clear that times are different in the energy sector now than they were 30 years ago, and we must undertake a review and that’s what we need to do as responsible stewards of the nation’s assets,” Jewell said in a conference call with reporters. “That was a time, 30 years ago, when our nation had very different priorities and needs. The result was a federal coal program designed to get as much coal out of the ground as possible, and in many ways that’s the program that we’ve been operating ever since.”
The announcement, initially reported late Thursday, comes three days after President Obama hinted of coming reforms to federal energy policy in his State of the Union address.
The decision was cheered by environmentalists but denounced by industry groups and politicians from Western states, where federal coal leases provide thousands of jobs as well as revenue for state and local government coffers. Obama administration officials have been debating such a change for years, saying current practices contribute to a glaring contradiction in U.S. energy policy, which simultaneously promotes the sale of federally owned coal even as it seeks to limit greenhouse-gas pollution from coal burning.
Interior Department officials said the review would take the form of a Programmatic Environmental Impact Statement, which allows a broader look at all aspects of federal coal leasing across regions and can incorporate environmental and health impacts as well as financial ones. The last review on this scale occurred in the 1980s.
U.S. officials say the moves will not immediately affect production or jobs, as current federal leases produce enough coal to supply the country’s needs for 20 years. Jewell said exceptions to the new-lease moratorium could be granted to ensure adequate production of metallurgical coal used in steel production, or to allow small modifications to existing leases.
“We’ll make accommodations in the event of emergency circumstances to ensure this pause will have no material impact on the nation’s ability to meet its power generation needs,” Jewell said. “We are undertaking this effort with full consideration of the importance of maintaining reliable and affordable energy for American families and businesses, as well other federal programs and policies.”
Peabody Energy spokeswoman Kelley Wright said in an email that the decision will not deliver a serious blow to the company, but was still misguided.
“Thanks to Peabody’s investments over time, we have more than 20 years of production through our superior Powder River Basin coal reserve position, representing long-term security of supply and a competitive strength,” she said. “Nonetheless, the Administration’s actions represent poor policy and a flawed way to accomplish carbon goals. The way to a lower-carbon future is through technology, not by attempting to deprive Americans of the low cost reliable electricity that coal represents.”
Hundreds of millions of tons of federally owned coal are mined by private companies each year under laws requiring the federal government to seek maximum benefit for resources on public lands. Environmental groups and some independent analysts have long argued that taxpayers are under-compensated for coal extracted from vast mines on federally owned land across the West, and that prices do not reflect societal costs from pollution from coal-burning.
In his speech on Tuesday, Obama argued for decreasing reliance on fossil fuels as part of the larger effort to fight the causes of climate change. He said the administration would “push to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet.” The administration has supported policies that have led to rapid growth of solar and wind energy, which are now cost-competitive with coal and other fossil fuels in some parts of the country. Nationally, more people now work in the solar industry than in coal mines.
But several business associations immediately attacked the move, which the U.S. Chamber of Commerce decried as a “foolish crusade.”
“Another day, another front on the war on coal from this administration,” said Karen Harbert, president of the Chamber’s Institute for 21st Century Energy. “At this point, it is obvious that the President and his administration won’t be satisfied until coal is completely eradicated from our energy mix.”
A number of key Congressional Republicans also criticized the decision, saying it would weaken the economy and harm workers in coal states.
“We should be putting our nation on the path of continued energy strength, not undermining our energy security,” said Rep. Rob Bishop (R-Utah), chairman of the House Committee on Natural Resources. “Unfortunately the president’s bid to solidify his legacy with the extreme left will come at the expense of America’s energy needs and will make the lives of people more expensive and more uncomfortable.”
House Speaker Paul Ryan vowed to fight the administration’s plans to keep more of the nation’s coal underground. “Coal on federal land belongs to all Americans, but the president is denying people access to their own abundant, low-cost energy source.”
But environmental groups and a number of independent analysts said the reforms were long overdue, and would benefit Americans in the long run.
“This is a major shift that helps modernize the federal coal program,” said Jayni Hein, policy director at the Institute for Policy Integrity. “This planning process will disclose the environmental and social impacts of coal leasing, which are extensive.”
Sierra Club executive director Michael Brune said in an interview that the decision represented a fundamental shift in how the federal government had begun to operate, by curbing the supply of fossil fuels available for burning rather than just working to reduce overall demand. He noted that when Obama rejected the cross-border permit application to build the Keystone XL pipeline late last year, the president specifically said that part of his reasoning stemmed from the fact that governments have got to keep some of the world’s remaining fossil fuels locked in the ground.
“If Keystone was the kickoff, then this was a 50-yard downfield pass that helps us score a touchdown,” Brune said. “For years we’ve been arguing we need to combine action on our tailpipes and smokestacks with a supply-side strategy to keep dirty fuels in the ground, and in the last few months we’ve made tremendous progress.”
Mining companies currently pay a 12.5 percent royalty rate for coal taken from surface mines, compared to an 18.75 percent royalty for oil and gas from offshore drilling. Coal companies say the actual rates paid to the government are much higher because of bonuses and other fees paid through lease agreements.
Most of the coal mined from federal lands is used in U.S. electricity generation, though some is sold overseas. Government-owned coal harvested in the Powder River basin–the country’s biggest coal-producing region, straddling Wyoming and Montana–accounts for about 10 percent of all U.S. greenhouse gas emissions, according to a study last year by the Center for American Progress and the Wilderness Society.
“The federal coal program is frozen in time in the 1980s,” said David Hayes, a former Interior Department deputy secretary and senior fellow at the Center for American Progress. “The current rules, which were written when you could still smoke on airplanes and dump sewage in the ocean, neither deliver a fair return to taxpayers nor account for the pollution costs that result from coal mining.”
Sen. Edward J. Markey (D-Mass.), who ordered the first Government Accountability Office report on the program in the early 1980s, which led to the resignation of then-Interior Secretary James Watt, said it took multiple factors to finally get the administration to overhaul the leasing system.
“It’s been on autopilot for decades, and we’ve finally been able to find the combination of taxpayers getting shortchanged with impacts on climate to finally break through to have a set of solutions be put in place,” he said in an interview.
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