Will US Coal Lease Moratorium Increase Manufacturing Costs?


by | Jan 20, 2016

coalThe coal lease moratorium on federal lands and overhaul of the program, announced Friday by the Obama administration, was attacked by the fossil fuel industry as further proof of the war on coal and cheered by environmentalists as paving the way for a clean energy future. Its affect on businesses, however, is less clear.

The moratorium on new coal leases will be in place until the Interior Department completes an environmental impact study and develops new guidelines — and possibly fees — for coal development on federal lands.

In announcing the “pause” on new coal leases, Interior Department secretary Sally Jewell said the department estimates that the amount of coal reserves already under lease — that companies can continue to mine during the review — is enough to sustain current levels of production from federal land for approximately 20 years.

Energy companies and the US Chamber of Commerce contend the coal-lease moratorium will increase businesses’ electricity costs.

“Another day, another front on the war on coal from this administration,” says Karen Harbert, president and CEO of the US Chamber’s Institute for 21st Century Energy. “If the president wants electricity rates to skyrocket — as he once said he did — he’s on the right path.”

However, according to the Institute for Energy Economics and Financial Analysis, the Obama administration’s action will have little immediate impact on the US coal supply. According to the US Energy Information Administration, the US has 18 billion tons of recoverable coal in producing mines and an additional 256 billion tons of recoverable coal.

The US is producing just under 1 billion tons of coal per year — the nation’s coal production declined 11 percent in 2015, which is the biggest decline on record — and this amount is expected to decrease over the next decade.

“Under the Obama administration the Bureau of Land Management has entered into leases on 13 applications amounting to over 2.2 billion tons of coal,” says Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis. “These new reserves plus the reserves already under lease should offer an ample supply of coal in the coming years.”

The National Association of Manufacturing says coal production has been vital to the country’s manufacturing comeback. Is says as users of one-third of the US’ energy, manufacturers support policies that promote the leasing, exploration and development of coal resources, which are often on public lands.

“At a time when manufacturing is facing strong international headwinds, the last thing we need is a moratorium that undercuts our competitive advantage in energy,” NAM’s Ross Eisenberg, VP of energy and resources policy, told Environmental Leader. “As the Interior Department considers any changes to the leasing process, it should conduct a full examination into the impact on the manufacturing community and the men and women are involved in the manufacturing supply chain supporting the coal sector.”

In a NAM blog, Eisenberg says manufacturers key concerns include:

  • A vague pledge to incorporate the flawed “social cost of carbon” computation into mine leasing.
  • This move could artificially inflate electricity prices if royalty rates and leasing costs increase.
  • Manufacturers and the more than 12 million men and women who work in American manufacturing gain a great deal of value from reliable and affordable energy.
  • Adding to manufacturing costs through increased regulatory costs, and backdoor energy taxes, hurts the economy and does little to further the president’s goal of addressing income inequality.

“Unfortunately, the process that preceded the announcement was inadequate and resulted in an action that injects arbitrariness and uncertainty into the leasing process,” Eisenberg says. “Moving forward, potential leases could face significantly higher administrative burden, enhanced risk, and exposure to litigation. Ultimately this hurts manufacturers and we will continue to oppose the introduction of market distorting barriers to energy production.”

Photo Credit: coal via Shutterstock

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