Coal shoulder: BLM sells controversial coal mining lease, but no one’s buying
Today the Bureau of Land Management in Wyoming held a sale for the lease of 148 million tons of coal on public land in the Powder River Basin — and received not a single bid, a first for the BLM in the state.
The sale was the first of two that the BLM had planned in the area over the next month, which combined would pave the way for the extraction of 316 million tons of Powder River Basin coal. Cloud Peak Energy had asked the BLM back in 2006 to open the site of today’s lease to mining, presumably to expand on its adjacent Cloud Peak mine. But today, the energy company decided it wouldn’t bid, and no one else stepped up (federal coal leases frequently see only one bidder). Here’s Cloud Peak CEO Colin Marshall in the company’s press release:
We carefully evaluated the estimated economics of this LBA [lease by application] in light of current market conditions and the uncertainty caused by the current political and regulatory environment towards coal and coal-powered generation and ultimately decided it was prudent not to bid at this time. … [W]e believe a significant portion of the BLM’s estimated mineable tons would not be recoverable by us if we were to be the winning bidder in the BLM’s competitive process. In combination with prevailing 8400 Btu market prices and projected costs of mining the remaining coal, we were unable to construct an economic bid for this tract at this time.
In other words, coal in this country is getting more difficult and costly to mine, domestic demand is falling, and Obama has directed EPA to crack down on emissions from coal-fired power plants. Even the coal industry’s hail-mary plan to stay profitable by pushing exports to Asia faces setbacks. We agree with Cloud Peak that starting up a whole new coal-mining operation is probably not prudent at this point.
The BLM’s coal-leasing process is already rife with problems: In June, an Interior Department inspector general’s report found that the BLM routinely underestimates the value of federal coal leases, failing to take into account the more lucrative Asian market. Taxpayers lose out on tens of millions as a result. But this time, even that hefty discount wasn’t enough to get Cloud Peak to bid.
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