Obama cracks down on coal

Last Friday President Barack Obama announced measures to overhaul coal mining on public lands in the United States, including a freeze on new coal leases and higher royalty rates to compensate for the environmental costs. John Dyer reports from Boston.

President Barack Obama announced a series of measures last Friday that will make it more difficult – and more expensive – to mine coal on public lands. (Image credit: Peabody Energy)

President Barack Obama announced a series of measures last Friday that will make it more difficult – and more expensive – to mine coal on public lands. (Image credit: Peabody Energy)

President Barack Obama foreshadowed the measures in his State of the Union address last Tuesday:

“Rather than subsidise the past, we should invest in the future — especially in communities that rely on fossil fuels,” Obama said in his annual address to Congress.

His plan is to limit coal mining on public lands, thus putting a damper on the entire industry.

More money to protect the climate

The measures change the way the US will manage its oil and coal resources, Obama said, so that they “better reflect the costs they impose on taxpayers and our planet.”

The measures put a moratorium on new applications for mining on public land, allowing regulators time to conduct an environmental review of the industry and impose fees on coal to fund efforts to battle climate change. Existing leases will not be affected.

The new measures send a message to coal mining companies and investors that the government is seeking to transition the American economy away from coal, which is one of the dirtiest energy sources, and towards natural gas, solar, wind and other renewable energy. Obama has also put restrictions on coal-fired electrical plants, further suppressing demand.

Coal industry under pressure

Industry representatives said the reforms would hurt an industry already struggling economically amid low energy prices, including a glut of natural gas that is cleaner and more efficient than coal.

“It appears that they’re going after the federal coal leasing program with the intention of keeping coal in the ground,” says National Mining Association spokesman Luke Popovich.

Last Monday, the second-biggest coal producer in the country, Arch Coal, declared bankruptcy. Other big mining companies, including Alpha Natural Resources, Patriot Coal Corporation and Walter Energy have also sought court protection to manage their debts as the price of coal has dropped from more than USD 90 per metric tonne five years ago to around USD 47 per metric ton today.

Around 40 per cent of coal mined in the US comes out of public land, according to the U.S. Department of Energy. Most mining activities take place in Wyoming, Montana, Colorado, Utah and New Mexico.

Under the companies’ current operation schedule, they could mine coal that would fulfil markets needs for the next 20 years without obtaining new leases, according to White House estimates.

Industry saved billions in fees

Last year, the US received around USD 1.2 billion in fees from companies mining public lands. That’s a leasing cost of around USD 3 per acre.

Critics as well as independent government auditors have said the fees were low because they reflected coal prices and industry expenses of the 1980s. They also reflect how the mining industry wields too much power over the U.S. Department of Interior, the agency that grants the leases, critics said.

“We’re talking about a programme that short-changed taxpayers more than $30 billion over the last three decades,” says Theo Spencer, an activist at the Natural Resources Defense Council. “We need to align the use of our public lands with our obligation to protect future generations from the growing dangers of climate change.”

Real costs should be reflected

Advocates like Spencer as well as Obama officials have said the coal industry should not only spend more on mining fees, but also pay fees that reflect the environmental or social cost of coal, including how it pollutes the air and how mining hurts the wildlife and the environment.

“The federal coal program is frozen in time in the 1980s,” former Deputy Secretary of the Interior David Hayes said in a statement to the press. “The current rules, which were written when you could still smoke on airplanes and dump sewage in the ocean, neither deliver a fair return to taxpayers nor account for the pollution costs that result from coal mining.”

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