Coal-Lease Reform a ‘Step Toward Better U.S. Energy Security’

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As the Obama administration prepares to announce new federal policies that cut back on subsidies for companies that mine coal from federal lands, the reforms are “welcome, long overdue and in the best interest of taxpayers,” said Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis (IEEFA).

“This, at bottom, is also a step toward better U.S. energy security,” Sanzillo said.

“Current policy subsidizes the development of economies that compete with the United States and that allow coal producers in the Powder River Basin of Montana and Wyoming to continue their campaigns to accelerate sales to China, Taiwan, Japan, South Korea, Vietnam, Thailand and India,” Sanzillo said. “With the depletion of Central Appalachian coal, the Powder River Basin becomes the nation’s largest and last coal reserve. It is a national resource of strategic importance, and should be treated as such rather than as a source of subsidized profit for coal companies and foreign development.”

Sanzillo said the reforms “could reestablish a fundamental risk-and-reward relationship between coal producers and U.S. taxpayers.”

“Coal exports will still be mined from the Powder River Basin even with the market difficulties the coal industry faces. As long as that’s the case, federal taxpayers and host states are due their share of compensation on what they own.”

“The coal industry is failing spectacularly,” Sanzillo said. “Current policy only props up a business model that cannot compete with low natural gas prices, rising market penetration of renewables and increased public support for alternatives to coal. It is plain that the country is moving away from coal usage, a policy trend that is inconsistent with providing public subsidies to coal exporters.”

In August, IEEFA submitted public testimony in favor of reforms (see The Federal Government Owns the Nation’s Largest Coal Deposits—and Must Act Accordingly”). IEEFA in August also wrote a formal letter to Interior Secretary Sally Jewel in favor of reform.

In 2012, IEEFA published “The Great Giveaway,” a study that concluded 30-year-old federal coal-lease policy was outdated and that called for a moratorium on federal coal leases.

Director of Finance Tom Sanzillo has 30 years of experience in public and private finance, including as a first deputy comptroller of New York State, where he held oversight over a $156 billion pension fund and $200 billion in municipal bond programs.