Cheap Federal Coal Supports Largest U.S. Producers

New report highlights how much of U.S. coal production comes from federally subsidized leases, and even so, coal companies struggle to stay afloat.
Coal companies are struggling to stay afloat despite favorable federal leases

Coal companies rely on favorable federal leases, but even Peabody Coal, the nation's largest coal producer, might seek bankruptcy protection. Credit: Reuters

The top three coal companies in the U.S. mine the majority of their coal, as much as 88 percent of their total production, from land owned and leased by the federal government, according to a report published Wednesday by the environmental group Greenpeace.

The report, which detailed the companies' dependence on subsidized, government-owned coal, came two months after Arch Coal, the second largest U.S. coal producer, filed for bankruptcy. On Wednesday Peabody Energy, the world's largest private sector coal mining company, said in a financial report that it may also seek bankruptcy protection.

Greenpeace obtained the information through a public records request for information about federal coal production for each of the companies and their subsidiaries in 2014. The group then compared this information to each company's total coal production. The report added to existing knowledge of industry's reliance on subsidized coal from federal lands or coal that is otherwise owned by the U.S. government.

"These three companies are tremendously dependent on what has been an underpriced and undervalued public resource," said Bill Corcoran, Western regional director for Sierra Club's Beyond Coal campaign, who did not work on the report. "I didn't know these companies were this dependent, I hadn't seen it put together like this."

The report found that each of the three companies rely on federal coal for more than two-thirds of their production. Two of the companies, Cloud Peak Energy and Arch Coal, get more than 80 percent from federally leased land. At the same time, the companies have tried to block federal policies that threaten this business model.

"These companies are attacking climate change policies, clean air rules, clean water rules and decry a so called 'war on coal,'" said Joe Smyth, Greenpeace spokesperson and author of the report.  "At the same time they depend to a huge extent on federal coal."

Government watchdogs said the report shines a light on longstanding policies favorable to coal companies. The federal government has provided the coal industry with more than $70 billion in tax breaks and subsidies since 1950, according to a 2009 report by Taxpayers for Common Sense. For years, companies have been granted access to the country's immense public-land coal resource at prices well below market value.

"We have these vast amounts of coal that taxpayers own and that we are losing significant revenue on by undervaluing it in the form of royalty giveaways, bad leasing deals and an uncompetitive process," said Autumn Hanna, senior program director for Taxpayers for Common Sense.   

The Obama administration announced a moratorium on new coal leasing on federal lands on January 15, as part of an overhaul of its leasing program to better reflect environmental and climate costs. Federal coal leases produce as much greenhouse gases a year as 161 million cars, according to a recent study commissioned by the Center for American Progress and The Wilderness Society. The leases in the Powder River Basin of Wyoming and Montana alone account for 10 percent of U.S. emissions.

"I think most Americans would be surprised to know that coal companies can make a winning bid for about a dollar a ton to mine taxpayer-owned coal," Interior Secretary Sally Jewell said prior to that announcement.

The moratorium doesn't affect existing leases, which the Department of the Interior said are enough to sustain current levels of production from federal land for the next 20 years. In addition, companies that file for bankruptcy would not be forced to stop production or cancel their leases. They could restructure their debt and continue to operate.

The Greenpeace report also highlighted climate-related damages caused by the coal industry.

"Combined, the 522 million metric tons of carbon dioxide from these top three U.S. coal mining companies' 2014 federal coal production would amount to $18.8 billion in damages to society," the report said. The damages are based on the federal government's social cost of carbon figures that include increasing health costs and other impacts from climate change.  

"It makes sense for the Obama administration to completely overhaul the federal coal program to bring it in line with what the administration is trying to do on climate change," Smyth said.

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