As part of a series of listening sessions held across the country, representatives from the Bureau of Land Management recently came to Gillette, Wyo., to meet with residents about the agency’s federal coal program. The meeting quickly turned into an impassioned discussion about the future of the coal industry.
Janice Schneider, with the Department of the Interior, said the agency was looking for comments on “how the Bureau of Land Management can best manage its coal resources.”
The other issue was whether or not the BLM should charge coal companies higher royalties for coal mined on federal land. Independent studies have found that coal companies may not be charged enough for federal coal.
Operating the federal coal program is complicated, wonky business. But the meeting was not. It wasn’t a discussion of how much coal companies should pay to mine publicly owned coal or at what point in the process those royalties should be assessed. It became a forum for people to vent their frustrations and fears about the industry’s future.
“What you’re proposing will be devastating to our communities, to our kids, and to our families,” said Sheri England, the executive director of a local non-profit.
“We don’t want to be forced onto welfare in Gillette. We want to work and pay our way through life without asking for government assistance,” said grandmother Penny Russell.
“Pardon me please if I seem a little nervous and uneasy. My livelihood does lie in the balance here,” said coal miner JJ Mendoza.
Why does the federal coal program inspire such strong emotions?
Let’s take a step back. As a member of the American public, you own coal. Yes, coal. Many of the country’s biggest coal deposits are on federal land—land belonging to the public.
Around 84 percent of coal mined on federal land comes from Wyoming, and another five percent from Montana. In both states, that coal is mined from a geologic region called the Powder River Basin (PRB). PRB coal, as the table below indicates, sells for substantially less than coal from every other U.S. basin.
Coal companies say that’s because PRB coal is close to the surface and therefore cheap to mine. Critics say PRB coal is selling at below-market rates thanks to federal policies, like the federal coal program.
Under the BLM’s federal coal program, despite the lower-cost coal, Wyoming generates the highest royalty payments of any other state by far. Last year the state received around a quarter of a billion dollars, which pays for things like school and road construction.
The next three most prominent federal coal producing states, Utah, Montana and Colorado, all received less than $25 million, according to the Office of Natural Resource Revenue.
Under the current system, recent reports show that coal companies often pay less than the required 12.5 percent royalty for PRB coal when selling to a subsidiary, instead of paying royalties on the final sale. But the fear in coal towns like Gillette is that if companies have to pay more in royalties, it will be a financial burden to already struggling companies that will result in layoffs.
Hundreds showed up at the meeting, including Wyoming’s entire Washington D.C. delegation.
Sen. John Barrasso spoke strongly against updates to the federal coal program. Leigh Paterson/Inside Energy
“I find it extremely hypocritical for the administration to ask whether it is getting a fair return on federal coal when it has gone to such lengths to suppress the demand for coal,” U.S. Sen. John Barrasso said.
Barrasso gets at the root cause of the frustration expressed by so many at this meeting and at similar hearings in Colorado, Montana, and New Mexico this summer. Coal miners are fighting for jobs, many of which are enabled by the federal coal program. But those jobs are threatened, in part by the new federal climate regulations. They consider a possible hike in royalties as one more blow.
Comments at the meeting reflected everything happening in the coal industry right now: layoffs, bankruptcies, decreased demand, and, of course, one of the biggest factors of all, climate change.
“While discussing the economic impacts of coal is necessary, this conversation would be incomplete without acknowledging the basic scientific realities that the climate is changing, that we are responsible and that coal is the number one contributor to climate change,” said Sam Pennington, a college student.
Federal regulations, like the Clean Power Plan, are contributing to a decrease in demand for coal. And although the goal of that plan is to slow climate change by cutting down on carbon emissions from burning coal, climate change was hardly mentioned during the meeting.
Higher royalty rates might keep more coal in the ground. That outcome is high on the agenda for some of the groups, like the Sierra Club, that are pushing for royalty reform. All this debate reveals a disconnect at the federal level, between the federal coal program itself, which has produced around five billion tons of coal over the past decade, and the Obama administration’s climate change agenda aimed, in part, at burning less of it.
Interior Secretary Sally Jewell acknowledged that tension during a speech earlier this year.
“Coal is going to continue to be an important part of our nation’s energy mix in the future. How do we manage our program in a way that is consistent with our climate change objectives?” Jewell asked.
It’s a challenging question for lawmakers and regulators who are walking a fine line these days between supporting energy development and, in this case, thousands of coal jobs, while continuing to battle climate change.