As Federal Coal Review Begins, the Biggest Coal Companies Hope to Keep Their Corporate Welfare

One of Peabody’s massive coal strip mines in the Powder River Basin. Photo by Greenpeace / Tim Aubry

Last week, the Interior Department announced the next step in its comprehensive review of the federal coal program, publishing a notice which begins the Programmatic Environmental Impact Statement process. In other words, the Obama administration is asking Americans to help shape the future of the federal coal program.

As Bureau of Land Management Director Neil Kornze put it: “We have an obligation to all Americans, as well as future generations, to ensure coal resources we manage are administered in a responsible way. As we undertake this review, we look forward to hearing from the public on a wide range of issues, including how, when and where to lease federal coal, how to account for the environmental and public health impacts of federal coal production and how to ensure that American taxpayers earn a fair return for the use of their public resources, including whether current royalty rates should be adjusted.”

Asking the public how to best manage the coal we own is a major change from the past, when coal companies like Peabody dominated decisions around the way our coal was managed, with little oversight or public participation. That allowed a few companies — Peabody, Arch Coal, and Cloud Peak Energy — to dramatically increase the amount of this publicly-owned coal they mine. In fact, our recent report showed that most of the coal mined by the three biggest coal companies in the U.S. belongs to the American public.

That finding was based on government data obtained through a Freedom of Information Act (FOIA) request, showing that Peabody Energy, Arch Coal, and Cloud Peak Energy each depend on our federal coal, mostly strip mined from public lands in the West, for the vast majority of their 2014 U.S. coal production — 68% for Peabody, 83% for Arch, and a whopping 88% for Cloud Peak Energy.

Perhaps unsurprisingly, the coal industry’s response to the report was defensive. Industry publication SNL reports: “Following the release of a Greenpeace report critical of the federal coal leasing program, Cloud Peak Energy Inc., Arch Coal Inc. and Peabody Energy Corp. defended the companies’ practice of mining for coal primarily from public land.”

Much of the coal industry’s response, detailed in the SNL article, consisted of little more than name calling. The Wyoming Mining Association dismissed “extreme environmentalist groups” while a Cloud Peak Energy spokesman called Greenpeace a “joke.” Energy and Environment news heard from a spokesman for the National Mining Association, who said, “I don’t credit Greenpeace with a reliable understanding of economics or business.” (I’ll just note that the president of the National Mining Association is the CEO of a bankrupt coal company).

None of the coal companies disputed the key finding in the report — that most of the coal they mine actually belongs to the American public. Instead, besides the name-calling, spokespeople for each company sought to explain why they think this is actually great! Cloud Peak touted the “significant benefits from the federal coal program,” while Arch called the federal coal program a “tremendous success story.” Peabody said that the “federal leasing program brings enormous revenues to the federal government.”

Of course, these companies’ desire to continue mining billions of tons of our publicly owned coal isn’t based on their enthusiasm to pay into the federal treasury. In reality, coal mining companies use a variety of tricks to minimize what they pay for our coal.

For example, coal companies regularly ask for (and receive) permission to pay less in royalties for federal coal. Interior Secretary Sally Jewell herself has acknowledged that in the past, “our practice was really about getting as much coal as possible,” and that “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.” In fact, sometimes coal lease sales go for far less than that — even less than one penny per ton.

A more likely explanation for these companies’ enthusiasm for mining our federal coal is that it has allowed them to dramatically expand the amount of coal they mine. Although several companies mine federal coal, these three companies in particular — Peabody, Arch, and Cloud Peak — dominate federal coal production and account for more than three-quarters of all the federal coal mined in 2014. And in part because of their access to this subsidized federal coal, these companies have grown to become the three largest coal producers in the United States.

For company executives, bigger companies mean bigger paychecks, even when those companies fail to adapt to the changing energy economy and head toward bankruptcy. This is particularly acute with Peabody, the largest U.S. coal company. As David Roberts writes at Vox:

This 2015 report from the Institute for Energy Economics and Financial Analysis reveals that the top five Peabody executives pulled down about $27 million in compensation in 2011, when the stock was at its peak.
In 2014, after the company’s stockholders had lost $16 billion in value, thousands of workers had been laid off and Peabody was headed for bankruptcy, they pulled down about … $25 million.
As atonement for his sins, Boyce, the CEO, saw his compensation slashed from from $10 million in 2011 to … $11 million in 2014. (Boyce also made $26 million selling stock options in the years just before the crash.)

It’s not just Peabody, either. Arch Coal executives even gave themselves $8 million in bonuses right before filing for bankruptcy. Clark Williams Derry at the Sightline Institute:

The executives of bankrupt coal industry giant Arch Coal, which declared itself insolvent back in February, apparently were quite proud of themselves for driving their company into the ditch. So proud, in fact, that they decided to give themselves $8 million in bonuses right before filing bankruptcy paperwork.
Arch Coal Inc. paid its top executives more than $8 million in bonuses the business day before the company filed for bankruptcy in January, according to U.S. Bankruptcy Court for the Eastern District of Missouri filings published last week.
Bonuses on Friday, bankruptcy on Monday! You’d almost have to admire the chutzpah, if it weren’t for the fact that the bankruptcy process has squeezed retirees and shortchanged mine cleanup responsibilities. And what makes the self-serving bonuses even more galling is that they’re a drop in the bucket, considering that Arch’s corporate insiders paid themselves more than $29 million in the year leading up to bankruptcy.

So these companies used their access to cheap federal coal to expand their operations, gave their executives multi-million dollar bonuses, and are now seeking to ditch the commitments they made to communities.

I guess this must be an example of that “reliable understanding of economics or business” that we lack.

Beyond the coal industry’s rhetoric, the broader point is that most of the coal these companies mine actually belongs to us. And while the Interior Department is responsible for managing it on our behalf, until recently it has largely allowed the companies themselves to manage federal coal — with pretty dismal results.

Hopefully, the review of the federal coal program will provide an important opportunity to end this corporate welfare for coal. Instead, our government can support efforts to address climate change and transition to renewable energy while consulting with communities impacted by coal mining, transport, and burning.

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