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A Critical Month for Climate Change at the Interior Department

spencer-theoIt’s a critical month for climate change at the Interior Department.

On Friday, comments were due on a proposed rule to close a loophole that allows coal companies to avoid making proper royalty payments on taxpayer-owned coal by “laundering” the sales through affiliate companies.

And more importantly, at the end of the month the Interior Department is expected to announce a resource management plan for the Powder River Basin in Wyoming that will make 10.8 billion tons of coal available for sale. That’s eleven times the amount of coal the US burns in a year.

With coal companies that mine federal land in the region already sitting on at least a decade’s worth of stockpiles, that plan hardly makes sense. But more significantly, it’s well out of step with President Obama’s Clean Power Plan, and goals to cut US carbon pollution emissions from existing coal plants 30 percent over 2005 levels by 2030.

Through the Clean Power plan, vehicle fuel efficiency standards, tighter controls on hazardous pollutants from power plants, and moves to boost the development of renewable energy and energy efficiency, this Administration has done more to combat climate change than any other.

Secretary Jewell said recently it’s “time for an open and honest conversation” to deal with concerns around Interior’s coal leasing policies. She also said the question “[h]ow do we manage the program in a way that’s consistent with our climate objectives” needs to be addressed. We hope that conversation happens soon, and its outcome is a more economically and environmentally responsible way of doing the taxpayer’s business.

But let’s get to closing this loophole. The proposed rule is intended to stop companies from skirting appropriate royalty payments on federally owned coal by selling it to affiliate companies. The vast majority of this coal is on federal lands in the nation’s largest coal producing region, the Powder River Basin (PRB) of Montana and Wyoming. Currently, big coal companies operating in the PRB like Arch and Peabody are selling coal to subsidiaries for approximately $10 a ton and paying a royalty fee on that sale. But then those affiliates are turning around and selling the coal to power plants for at least three times that amount, or to exporters for more than $60 a ton. The new rule would stop these “non-arm’s length transactions.”

recent analysis by the Center for American Progress found that Arch Coal has a total of 83 domestic and foreign subsidiaries, and Peabody Energy has 242. Of the other operators in the Powder River Basin (PRB), Alpha Natural Resources has 184 domestic and foreign subsidiary companies, Ambre Energy has 26 and Cloud Peak Energy has 31.

Theo Spencer
Theo Spencer is a senior advocate for the Natural Resources Defense Council Climate Center in New York.
 
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