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A new report from the U.S. Government Accountability Office (GAO) found that the U.S. government has failed to ensure that coal companies pay the fair market value when paying for leases. The result is a loss of millions of dollars of revenue for the U.S. Treasury and a windfall for coal companies.
The federal government owns vast swathes of land, particularly in the west, which hold huge reserves of hard rock minerals as well as coal, oil, and natural gas. The Bureau of Land Management (BLM) is responsible for leasing out tracts of public lands to coal companies for mining and BLM is expected to calculate the fair market value when determining how and which bids to accept.
Related article: Coal Industry in Structural Decline
However, the report concludes that BLM often only looked at past sales to determine how much value coal might garner on the open market, not future values. BLM at times accepted bids that came in below what they considered the fair market rate. Also, BLM often failed to consider the value of the export market, and with the U.S. coal increasingly finding receptive markets overseas, BLM’s calculations have forfeited millions of dollars for the U.S. taxpayers. Finally, the report found that most of the auctions that BLM holds have only a single bidder, in what is supposed to be a competitive process.
The report was requested by then-Congressman Ed Markey – now a Senator from Massachusetts – who called for a suspension of the coal-leasing program in light of the GAO report. Environmental groups called for a radical overhaul of the process while the National Mining Association played down the report’s findings as minor flaws in a program that otherwise works well. According to Tommy Boudreau, Acting Assistant Interior Secretary for Lands and Minerals Management, BLM is already working to correct the problems in its leasing program.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com