Times are a-changing: Energy portfolios must also change

It seems that after 275 years of mining coal, both U.S. regulations and swiftly changing private energy markets are arriving at the same conclusion: financial markets and the earth's atmosphere can no longer afford to burn coal as in the past.

When we were Bureau of Land Management (BLM) State Directors, in the 1990's, responsible for leasing public lands for coal production, the understanding of climate change was just hitting the public consciousness. When we toured various coal mines in our region, it struck us as odd that so much of our Nation's energy production was still tied to an antiquated source of energy like coal, but we didn't yet fully understand the climate implications.

In the past 20 years much has changed and the BLM's coal leasing program needs to change with it. When Secretary of the Interior Sally Jewell announced a review of the federal coal leasing program, she noted that the regulations for leasing and producing coal owned by the American people are over 30 years old. She also cited "an obligation to current and future generations to ensure the federal coal program delivers a fair return to American taxpayers and takes into account its impacts on climate change."

The public lands managed by the BLM are under Congressional direction to be managed "in a manner that will protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource" and other values. If public lands contain coal resources and are suitable for coal leasing, the agency can lease them to private companies to develop the resource. In making leasing decisions, private companies consider long term markets, prices and the regulatory environment under which they operate.

Energy resource markets have seen total U.S. coal production decline by 22% in the past ten years. "The declining number of new mines reflects reduced investment in the coal industry, strong competition from natural gas, stagnant electricity demand, a weak coal export market, and regulatory and permitting challenges," the U.S. Energy Information Administration said in a recent report. Confirming this trend, no federal coal reserves in Wyoming or Montana have been leased since 2012.

Despite these long term market forces, Senate Majority Leader Mitch McConnell, R-Ky., called the review of the coal leasing program "just the latest front in an ideological war on coal". But in fact the nation's ideology has long favored coal. The coal production royalty rate has been 12.5 percent since the 1970s, however, coal companies rarely pay the full 12.5 percent due to subsidies, loopholes and deductions. According to recent studies, the effective royalty rate for public coal is under five percent.

The environmental impacts of burning coal can no longer be ignored or treated as an economic externality that has no societal costs. Burning of coal and other fossil fuels for electricity production accounts for 31 percent of domestic greenhouse gas emissions, making it the single-largest factor contributing to anthropogenic climate change.

If the U.S. is going to make progress on President Obama's plan to reduce carbon emissions from fossil fuel power plants by 32 percent by 2030, then the government's own program to lease coal needs to be part of the equation. While state and federal environmental reviews are conducted on decisions to lease coal, the BLM has yet to do a comprehensive environmental analysis that includes the full impact of carbon dioxide and other greenhouse gasses associated with coal production on public land.

Even though the Interior Department will stop issuing new coal leases while their review is underway, the coal reserves already under lease are estimated to be enough to sustain current levels of coal production from federal land for another 20 years. We commend Secretary Jewell for taking a comprehensive look at an outdated and subsidized resource program and for integrating the goals of sound and sustainable land management with the President's goals to address climate change.

Ann J. Morgan was the Bureau of Land Management state director in Nevada and in Colorado (1994 to 2005) and is now a consultant living in Colorado. Larry Hamilton retired from the BLM in 2006 after serving as the national director for the Office of Fire and Aviation. He was also the state director of Montana and the Dakotas, associate state director of the Eastern States Office, and director of the National Training Center. Larry now lives in North Carolina.

Originally posted in the Deseret News on Sunday March 20, 2016

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