Report: US government getting shortchanged by undervalued coal lease sales

Jun 11, 2013

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The US government isn’t getting the full fair market value from coal lease sales on public lands. That’s according to a report released today by the Department of the Interior’s Office of Inspector General.

The report says recent lease sales potentially undervalued the coal by $62 million. The Bureau of Land Management appraises the leases instead of using the DOI’s Office of Valuation Services like its rules say it should, and the BLM does not take into account increased exports of coal abroad.

University of Colorado Law School Professor Mark Squillace says valuing coal locally, instead of globally, is a longstanding problem.

“For years, they’ve been selling coal out of the Powder River Basin for use all over the United States. So why in the world would you limit yourself to the Powder River Basin as the market that you are concerned about in setting fair market value? That just strikes me as odd and it seems somewhat inconsistent to me with the suggestion that they should be looking more broadly at the market when they’re dealing with exports,” says Squillace.

The report says that it’s important to calculate a fair market value, especially since coal leasing is not competitive. Squillace says the report did not go into enough detail about what he says are big issues.

“There seems to be this sort of assumption that what they say is a competitive market generally doesn’t exist for coal leases. But they don’t even try to explain why that’s the case. And the answer, of course, is that they let the coal companies drive the process,” Squillace says.

Since 2002, there have been 47 coal lease sales, 18 of which were in the Powder River Basin.