IEEFA: U.S. Taxpayers Lose More Than $1 Billion With BLM OK Of Peabody’s Low-ball Bid For Powder River Basin Coal
“Competitive” Bid Process With Only One Company Underscores Deep Flaws in BLM “Giveaway” Process; Approved Price for U.S.-Owned Coal Well Under Half of Fair Market Value.
WASHINGTON, June 29, 2012 /PRNewswire-USNewswire/ — U.S. taxpayers will lose an estimated $1.2 billion now that the federal Bureau of Land Management (BLM) has reportedly accepted Thursday’s bid from Peabody for 721 tons of federally owned Powder River Basin (PRB) coal, according to preliminary calculations announced today by the Institute for Energy Economics and Financial Analysis (IEEFA).
The BLM lease came just days after IEEFA released a major new report “The Great Giveaway: An Analysis of The United States’ Long-Term Trend of Selling Federally Owned Coal for Less Than Fair Market Value” available online at http://www.ieefa.org.
Report author Tom Sanzillo said that the report shows that the Peabody bid of $1.10 per ton for the Powder River Basin coal is well under the estimated fair market value of $2.79 per ton.
Commenting on today’s BLM bidding process, Sanzillo said: “The deeply flawed bid process leading up to today is a perfect illustration of everything that is wrong with the way the federal government is giving away taxpayer-owned coal for what is well under fair market value. The notion that this has resulted in U.S. taxpayers being cheated out of more than a billion dollars in a single day should be a wake-up call for Washington that this broken system is badly in need of repair.”
According to the IEEFA report issued on January 25(th), taxpayers missed out on an estimated $28.9 billion in revenues over 30 years due to Powder River Basin being sold at less than its fair market value. In issuing the report, IEEFA called for a moratorium on additional Powder River Basin coal sales and a full-scale federal investigation of the deeply flawed BLM program. (The General Accountability Office and Department of Interior Inspector are each already conducting probes of the program.)
The Powder River Basin currently produces 44 percent of the nation’s coal.
Since 1991, only four out of 26 major Powder River Basin coal sales have had more than one bidder, and the small handful that were “competitive” only had two bidders each. IEEFA concluded that this failure resulted from of a lack of transparency under which BLM coal-leasing activities neither have been audited nor subjected to any other publicly available external review for almost 30 years. This lack of oversight is especially troubling as a scandal erupted three decades ago over the same industry give-away practices, and clear, transparent reforms were laid out in the wake of that scandal by Congress.
Located in southeastern Montana and northeastern Wyoming, Powder River Basin in the U.S. coal picture has increased significantly in the last 40 years. The Department of Interior (DOI), through its agency the Bureau of Land Management, is responsible for the sale of PRB coal. Given that the United States owns almost all the coal in the region, the U.S. government holds an effective monopoly of western coal. As a result, the DOI is extremely influential, shaping U.S. annual coal production levels and the market price of coal. An example of how the BLM program is not connected to reality, according to the report, is that the Powder River Basin is not officially recognized as a “Coal Production Region,” thus resulting in lower lease prices, and a process where industry proposes land for sale, rather than the government doing so.
The analysis was conducted by Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis. The author of several studies on coal plants, rate impacts, credit analyses, and the public and private financial structures for coal, Sanzillo spent 17 years with both the City and the State of New York, serving as the State of New York’s first deputy comptroller, a position responsible for the management and oversight of the state pension system and its investments, contracts, and audits.
IEEFA conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s Mission is to accelerate the United States’ transition to a diverse, sustainable and profitable energy economy and to reduce the nation’s dependence on coal and other non-renewable energy resources. For more information, go to http://www.ieefa.org on the Web.
SOURCE Institute for Energy Economics and Financial Analysis, Cambridge, MA