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After being AWOL on the climate for nearly six years, just recently, in announcing multiple climate initiatives, President Obama has given us the “audacity of ‘climate’ hope.” In his State of the Union sermon this year, he proclaimed, “I will not let this Congress endanger the health of our children by turning back the clock on our efforts.”
Indeed, the entire busload of “climate clowns” currently in control of Congress daily denounce Obama’s supposed War on Coal, while using the Bible to launch their own Holy Wars – on Climate, on Science, on Common Sense, on Compassion, and the Future of All Mankind. But if Obama has launched a War on Coal, someone forgot to tell the Bureau of Land Management (BLM). Perhaps he should invoke his own Biblical stories, like the one where Jesus drives the money changers out of the temple. He needs a “come to Jesus” moment with some of his own employees, and to drive the “money changers” out of the BLM.
While the Keystone pipeline has become the iconic environmental/climate battle in the United States, far removed from the media spotlight and the denunciations of high-profile climate activists, entrenched career employees and dysfunctional regulations at the BLM are helping Western coal companies starve the federal treasury, rip you, the taxpayer, off and light a much bigger carbon bomb than the Alberta Tar Sands and the Keystone pipeline.
Carbon pollution from publicly owned coal leased just during the Obama administration will cause damages estimated at between $52 billion and $530 billion, using the federal government’s own methodology for estimating the social cost of carbon. In contrast, the total amount of federal revenue generated from those coal lease sales only amounted to $2.3 billion. Nationwide, the value of federal coal to a domestic coal burning power plant averages $35 a ton. For this, the federal government collects a mere $2. This is a giveaway of a vast public resource – a taxpayer rip-off virtually unparalleled in the 21st century.
BLM’s Corruption Fiasco
The poster child of this corrupt fiasco is the Powder River Basin (PRB) in eastern Wyoming and Montana. The PRB accounts for 42 percent of US coal production and the federal government owns 80 percent of PRB coal reserves. Despite the obvious link between PRB coal and the climate crisis, the Department of Interior (through the BLM) is pushing to greatly expand PRB coal production. The BLM is in the process of issuing 16 new coal leases in the PBR, containing 10.2 billion tons of coal. If these plans are implemented, it will inject 16.9 billion additional metric tons of CO2 into the atmosphere.
Furthermore, the BLM plans to continue offering this public coal in the PRB at fire-sale prices by playing word games. Decades-old legislation would prevent this “give away,” but BLM dodges that kind of legal constraint by farcically claiming the Power River Basin, the largest coal-producing region in the country, is not actually producing coal. Simply by “decertifying” the PRB, the BLM removed constraints that would have been imposed on it as a “certified” coal-production area. That’s as if the NFL “decertified” the New England Patriots as an NFL football team, then ruled that therefore they can break any of the NFL league rules but were still allowed to play all the NFL teams, including competing in the Super Bowl and taking home the trophy. (Oh wait, that’s pretty much what they did.) In multiple ways, the BLM has allowed coal companies to game the system, design leases to suit themselves and acquire them for utterly absurd low prices.
Currently, the low-sulfur coal from the PRB can be sold for $70 a short ton and higher in South Asia markets. The same coal sells for less than $16 a short ton domestically. Not surprisingly, exports of PRB coal to South Asia have recently doubled. The fire-sale price paid to the BLM by domestic coal companies for coal owned by US taxpayers makes exporting coal to Asia extremely profitable.
It gets worse. BLM and the mining companies have collaborated in the development of a convoluted leasing procedure that gives BLM officials multiple opportunities to reduce the effective royalty rate well below its true market price.
Coal Companies’ Phony Subsidiaries
Over the last 10 years, each of the coal companies operating in the PRB have built an extensive network of captive affiliates and subsidiaries through which they sell and distribute their coal in what amounts to a shell game. Royalties collected by the BLM are applied at the first point of sale, but that usually ends up with the coal company selling the coal to their own subsidiaries, i.e. to themselves. The five largest coal companies in the area have set up more than 500 subsidiary, read “phony,” companies. Selling coal to captive affiliates has not changed how PRB coal is mined or the markets into which it is sold. It has simply reduced royalties below what the mining company would pay if its first “sale” were a true sale to an independent entity. The obvious result is completely manipulated profitability for the coal companies.
Mining companies are allowed to deduct transportation and washing costs from the sale price before applying the royalty. The BLM can reduce the royalty rate to as low as 2 percent of the sale price if a company declares their mine unprofitable due to adverse circumstances – such as limited access to coal or a decrease in its quality.
Intending to take full advantage of this extensive and perverse federal subsidy of the coal industry, coal companies and their allies are now pressuring port communities in the Northwest to allow them to expand their exports of PRB coal by altering their ports to make them capable of massive coal shipments to Asia. Econ 101 says if you lower the price of something, you will increase its consumption. A detailed analysis of the PRB coal-leasing program suggests that allowing this system to continue, let alone expand, will more than offset all the CO2 reduced by the President’s Clean Power Plan and produce far more than will be released by construction of the Keystone pipeline.
The below-market export prices that this system makes possible encourage China and India to choose coal over renewable energy and efficiency options that otherwise would be price competitive. The damage from exporting this amount of subsidized coal to Asia would go beyond encouraging more coal consumption in that region.
As the world’s top emitting countries, the United States and China are watched closely by other countries for their efforts to reduce carbon pollution. If the federal government does nothing to stop this conspiracy, it will signal to the rest of the world that the United States’ efforts to mitigate the climate crisis are hypocrisy personified, as the United States suppresses coal burning at home while promoting it abroad.
Climate and Health Disaster for the US
US coal burned in Asia is obviously just as much of a climate disaster as US coal burned in the US. In fact, burning coal in Asia is almost as bad for the American environment and public health as burning it in the US, because there are fewer pollution controls on Asian coal power plants, and a significant portion of the toxic emissions from coal plants in Asia migrate to the US and the rest of the world. Satellite photos prove the notorious “Asian Brown Cloud” makes it all the way to the US.
By the year 2020, Harvard University’s Daniel Jacob says, imported pollution will be the primary factor degrading visibility in our national parks.
While the White House, the EPA, environmental groups and climate activists have all fought successfully to reduce domestic coal emissions, the BLM has been quietly undoing much of its success. Every American is being exposed to particulate pollution, NOx, SO2, ozone, black carbon and toxic mercury from industrial smoke stacks throughout the world, burning coal dug from US soil, owned and subsidized by US taxpayers. If phone calls, angry emails, picketing, sit-ins, or civil disobedience are in your repertoire, it’s time to put your outrage and your skill set to good use and demand Obama do some housecleaning at the BLM.
For a detailed explanation of how the BLM conspires with Western coal companies in this corrupt and anachronistic leasing program, see Utah Physicians for a Healthy Environment’s extensive report.
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