NEW ORLEANS – Following on urgings by the world community to stop cosseting the fossil fuel industry with tax breaks, land grabs, and subsidies at the Paris climate summit, the Obama Administration on Friday put an end to new coal leases on US federal lands.
The President foreshadowed the move in his State of the Union last Tuesday, saying, “I’m going to push to 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 coal industry has enjoyed rock bottom leasing rates on federal lands in a system that’s not been updated for 30 years, helping it keep a competitive advantage over cleaner energy sources.
Slashing new leasing on federal lands might not sound that amazing until you consider that 43.2 percent – or nearly half – of coal mined in the US comes from Federal and Indian lands, according to a US Department of Energy, or DOE, report.
According to the US Bureau of Land Management, 475,171 acres of federally owned lands are leased by the coal industry. This approaches a quarter of the 260 million acres of land under the Bureau’s control.
“More than being mere anti-coal symbolism, ending public land leases below market value is a first crucial step toward a fossil fuel subsidies phase-out,” said Jonas Helseth, director of Bellona Europa. “These subsidies total $548 billion worldwide and their impact is devastating both for the environment and the economy.”
Helseth added that,” Bellona hopes that other countries – also major petroleum-exporting nations – will follow Obama’s lead in this: direct and indirect fossil subsidies must come to an end”
Coal subsidies still can’t help industry compete
The extent to which the coal industry is getting a leg up on the back of the US government came to light earlier in the week when the US DOE reported that solar has seen a job growth rate of three times over coal thus surpassing the number of coal workers in the US. It has also overtaken oil and gas.
And the solar industry has been creating those jobs with a minimum of help from Washington: US Federal subsidies for the industry balanced out to about $4 billion a year over the six years between 2008 and 2014 – with hints of even that getting slashed in 2016.
Compare that to the coal industries slippery system of subsides as tracked by Sourcewatch, which identified a host of sweetheart breaks for coal, include a $14 billion dollar a year pay-in for “producing non-conventional fuel.”
With coal receiving at least three times more in taxpayer funding than solar annually and still dog paddling to keep its workers employed, the industry’s rusty crutches are starting to show.
Obama’s plan to update the coal industry
Interior Secretary Sally Jewell has been guided by Obama to assess how the federal leasing plan is working out.
“Given serious concerns raised about the federal coal program, we’re taking the prudent step to hit pause on approving significant new leases so that decisions about those leases can benefit from the recommendations that come out of the review,” Jewell said in a statement Friday.
The Obama plan includes three measures to address these issues and update the federal coal program to account for taxpayer interests and environmental challenges.
The Interior Department will conduct a review to identify potential reforms to the outdated program, put a temporary pause on new coal leasing – not existing ones – and direct the U.S. Geological Survey to begin annual tracking and reporting on greenhouse gas emissions that result from fossil fuels extracted on public lands.
Bargain basement royalty rates for federal land use
The antiquated system means US taxpayers are missing out on hundreds of millions in royalty payments from coal companies leasing their public lands.
For instance, coal companies pay a 12.5 percent royalty rate for strip-mining federal and Indian lands – a percentage well below the 18.75 percent royalty charged to offshore oil and gas drillers.
In addition, royalty rate reductions, loopholes and subsidies, further drive down the rate coal companies pay out to less than 5 percent.
A fact sheet released by the Department of Interior says the review will size up these insufficient royalty rates and “ensure the sale of these public resources results in a fair return to the American taxpayers.”
European encouragement and European worries
Sirin Engen, a Bellona adviser on carbon capture and storage (CCS) said stopping new coal development on US federal lands was a good start, and hoped it would lead to other initiatives.
“From this side of the Atlantic it is indeed encouraging that Obama has stepped up in terms of creating a more sustainable energy mix,” she said in an email interview. “But we’re still hoping that he’ll start talking about the two other major emitters: aviation and industry.”
Indeed, America’s emissions goals submitted in Paris fall short of the European Union’s: The US is shooting for a 28 percent reduction by 2025 under 2005 levels, where the EU is seeking a 40 percent reduction under 1990 levels. Even so, all submissions at the Paris climate summit still point to a temperature rise of 3.5C, overshooting the hoped for 2C limit.
Bellona Europa’s Helseth, while applauding the local initiative, was leery about the preponderance of shale gas leading to a glut of coal in the US that would tip-toe cheaply onto European markets.
“Targeting coal is relatively easy when [the US] has shale gas aplenty at competitive prices, but do we know enough about the methane emissions from that?” he said, adding that gas to Europe from Norway came with a high price tag, or from dubious sources like Russia.
“Most of the coal in Europe actually comes from the US, where the producers can’t sell their coal due to shale and it’s therefore being dumped cheap in Europe,” said Helseth.
He said it was therefore imperative that the current coal crackdown in the US be used to halt flooding the European market with cheap, subsidized coal.
Time will tell how permanet the current moratorium will become: Presidents Richard Nixon and Ronald Reagan in the 1970s and 1980s declared moratoria on federal coal leases as well – which eventually ended.
Obama has done much to wield executive privilege, from his Clean Energy Plan, to sinking the Keystone XL Pipeline, his targeting of gas industry methane leakage, and took a highly publicized trip to Alaska to show the effects of climate change up close.
And though environmentalists like Helseth and Engen generally praised the announcement, they noted that the administration should still do more to completely end fossil fuel development – and tackle coal both on federal lands and on a state-by-state basis.