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Liberal think tank wants to overhaul federal coal leasing to consider climate

The federal coal program should be overhauled withmarket-based changes that include lease caps set to guide the country towardits climate goals, according to the liberal think tank Center for AmericanProgress.

In an Oct. 4 issue brief, the Center for American Progress,or CAP, put forth its vision for a new federal coal leasing program that wouldconsider U.S. climate goals, support economic transition in coal-dependentcommunities and be more likely to survive legal and political challenges. Theproposed program would be a credit-auction system that allows companies to bidon a pool of carbon credits to mine certain volumes of coal.

The report suggests that the U.S. Bureau of Land Managementoffer groups of leases together for bids rather than dealing with them case bycase. One of these systems could involve so-called intertract bidding, whichwould pit bids against one another that were not on the same tract of land.

"Rather than hosting a leasesale with multiple tracts up for simultaneous bid, the BLM should allow biddersto bid on a fixed amount of mining credits," the report said. "Thewinning bidders would gain the right to mine a certain amount of coal. Thesebidders would then submit applications for the specific tracts of land on whichthey would like to use their credits to mine the coal. This process would allowthe BLM to better prioritize the fairest return available to taxpayers whileallocating credits up to a preset cap."

Overall lease caps would beset based on U.S. climate goals and would be conducted based on five-yearcycles similar to the offshore oil and gas leasing, the report said.

CAP has been advocating for reform of the federal coalprogram since December 2014, when it released a report criticizing the leasing system, andenvironmentalists alsohave spoken out about the program. On the other hand, numerous coal and lawmakers have criticized thegovernment's moratorium on new coal leases, which has been in place sinceJanuary, and the review process on the federal coal-leasing program.

CAP said in the recent report that the U.S. cannot meet its goals of cutting greenhouse gasemissions without changing the lease program. "Federal coal, 90% of whichis produced in the Powder River Basin in Wyoming and Montana, is made availableto coal companies through a noncompetitive process at below-market rates,"the report said.

Rick Curtsinger, spokespersonof Wyoming-based Cloud PeakEnergy Inc., told S&P Global Market Intelligence that Americansreceive low-cost energy from PRB coal as well as billions of dollars inbenefits from leasing, tax and royalty payments from the current program.

"Thefederal coal leasing program is authorized by and operates under the Mineral LeasingAct, which requires the secretary to develop regulations that 'ensure themaximum economic recovery of coal,'" he said. "Developing regulationsthat would keep coal in the ground is a violation of this mandate under thelaw."