Obama administration to announce remake of coal program, freeze leases

[January 15, 2016]  By Patrick Rucker and Valerie Volcovici
 
 WASHINGTON (Reuters) - The Obama administration is due on Friday to announce an overhaul of how the United States manages coal development on federal land, and freeze new coal mining, according to government and conservationist sources, in a further move to confront climate change.

Interior Secretary Sally Jewell is expected to make the announcement at midday Friday from New Mexico, one of five western states with tens of thousands of acres under lease.

Democratic President Barack Obama in his State of the Union address on Tuesday said he would "change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet."

The new plan will require federal officials, when weighing land use decisions, to consider how burning coal could worsen climate change, said sources familiar with the plans.

It will also include moratorium on coal leases, said sources familiar with the effort, as the government works on longer-term structural reforms to the coal program.

The overhaul also will aim to maximize returns for taxpayers by updating royalty rates when mining companies pull coal from federal land, said the sources.

Interior Department spokesperson declined to give details about the Friday announcement.

Environmentalists have urged the White House to freeze new coal leases on federal land until it accounts for how that fossil fuel development contributes to climate change.

Coal leases are often awarded without a competitive bidding process, frequently going to a single bidder, and officials can undervalue the fuel heading to market, the nonpartisan Government Accountability Office has concluded.

"Public lands should be developed in the public interest but taxpayers have been short-changed for decades," said Theo Spencer of the Natural Resources Defense Council, an environmental group.

The Energy Information Administration says roughly 41 percent of U.S. coal production occurs on federal land, primarily in Wyoming.

The coal industry had been battered in recent years by competition from cheap natural gas and clean-air regulations that have raised costs for burning the black rock.

This week, Arch Coal Inc, one of the nation's largest coal companies, filed for bankruptcy - the latest mining company to seek protection from creditors in the current downturn.

The National Mining Association was not immediately available for comment.

Some analysts said that market conditions have dampened demand for new mining.

"Over the last two years a number of coal leases were bid out by the Bureau of Land Management and no bids were received, reflecting the fact that there are no market incentives to go forward with new mining," said Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis.

But for some environmental campaigners, the expected announcement bolsters their argument that all fossil fuels must be kept in the ground to combat climate change.

“The only safe place for coal in the 21st century is deep underground - these reforms will help keep more of it there,” said Bill McKibben, co-founder of activist group 350.org.

(Reporting by Valerie Volcovici and Patrick Rucker; Editing by Lisa Shumaker and Diane Craft)

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