How much is coal costing American taxpayers?

Climate Progress

Most Americans don’t realize just how much coal they own.

Consider this: coal accounts for two thirds of resources extracted from public lands for electricity generation. And Americans also own most of the Powder River Basin, a region stretching across Wyoming and Montana that accounts for roughly 43 percent of America’s coal.

With all that coal being the property of US citizens, you’d think the taxpayers were getting a lot of revenue from selling that resource to the coal companies. Not so much.

A new report concludes that uncompetitive leasing and poor oversight has denied Americans taxpayers of up to $28.9 billion since 1982.

According to an analysis from Tom Sanzillo, director of the Institute for Energy Economics and Financial Analysis, the government allows coal companies operating on public lands to purchase the resource at a price far below market value by supporting “auctions” with only one bidder.

This is a problem that environmental groups have raised for some time. But the new analysis shows just how much it’s costing American taxpayers:

As a result of policy choices and an inherently subjective and flawed fair market value appraisal process—the problems of which are exacerbated by the agency’s failure to consider changing market dynamics—the U.S. Treasury has lost approximately $28.9 billion in revenue throughout the last 30 years. Despite past political scandals and promises of programmatic reform, neither the DOI nor the BLM coal leasing activities have been audited or the subject of any major publicly available, external review regarding the sale of PRB coal for almost thirty years. As applied by the federal government in the case of federal coal leasing, the term “fair market value” rings hollow.

Since 1991, the Bureau of Land Management has issued 26 leases to coal companies. According to Sanzillo, only four of these leases have ever featured more than one bidder. And in the cases where there was actual “competition,” the auction featured two bidders.

Today, as coal consumption drops in the U.S., companies are now purchasing coal from taxpayers at ridiculous discount rates and selling the dirty resource to the highest bidder on the international market — thus subsidizing the boom in global warming pollution in Asia. (See: The BLM’s Corrupt Coal Leasing Program: Billions In Subsidies To Peabody, Gigatons Of Carbon Pollution For The Rest Of Us.)

After a recent auction of Powder River Basin coal in which Peabody Energy was the only bidder, Grist’s David Roberts did some simple and shocking math:

The winning price in Thursday’s sale? $1.11 per ton.

Again: $1.11 per ton.

The price of a ton of Powder River Basin coal on U.S. spot markets? $9.15 per ton, as of May 11.

The price of a ton of coal exported to China? It averaged $97.28 per ton [PDF] in 2011. It’s now up to $123 per ton.

So, to summarize: You, the U.S. taxpayer, just leased another huge chunk of your land to Peabody Coal at $1.11 per ton of coal. Peabody will strip-mine that land and take the coal to China, where it will sell it for over $100 per ton. Peabody pockets enormous profits*, the U.S. taxpayer gets devastated land, and China accelerates global warming.

And it’s all being pushed through by the Obama administration.

Until now, the government has done nothing about the lack of competition in these auctions. But now that analysts, environmentalists, and lawmakers are finally elevating the issue, the Government Accountability Office is now set to do an audit of the leasing program.

Meanwhile, the BLM is set to “auction” another 721 million tons of taxpayer-owned coal from the Powder River Basin next week.