Obama administration announces halt on new coal leases

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Obama administration freezes new coal leases on federal land

Leland Vittert reports from Washington

WASHINGTON – The Obama administration announced Friday it will temporarily halt new coal leases on federal lands until it completes a comprehensive review to determine whether fees charged to mining companies provide a “fair return” to taxpayers.

The decision immediately triggered accusations from business groups and Republican lawmakers of a renewed "war on coal."

Interior Secretary Sally Jewell, on a conference call, stressed that the move “is not a pause on coal production” entirely -- but will give the government time to study the benefits of coal as well as its impact on the environment.

Jewell told reporters she is “confident” the pause on new leases will not disrupt the country’s ability to meet production needs.

Karen Harbert, president and CEO of the U.S. Chamber of Commerce Institute for 21st Century Energy, slammed the decision. Herbert called the move “a foolish crusade” that strips America of one of its “diverse mix of energy sources.”

"Another day, another front on the war on coal from this administration,” she said in a statement following the announcement. “At this point, it is obvious that the president and his administration won't be satisfied until coal is completely eradicated from our energy mix.”

Roughly 40 percent of the coal produced in the United States comes from federal lands. The vast majority of that mining takes place in Wyoming, Montana, Colorado, Utah and New Mexico.

It's unclear what impact the moratorium will have on many coal companies given the declining domestic demand for coal and the closure of numerous coal-fired power plants around the country. Coal companies have already stockpiled billions of tons of coal on existing leases.

But the announcement will no doubt please environmental groups that have long said the government's fee rates encouraged production of a product that contributed to global warming.

Senate Majority Leader Mitch McConnell called Friday's announcement the "latest front in an ideological war on coal that has contributed to devastation in communities in Eastern Kentucky and to the loss of thousands of jobs across the commonwealth."

The administration held a handful of public hearings last year to get feedback on the adequacy of the fees charged companies for coal mined on federal lands. The government collects a 12.5 percent royalty on the sale price of strip-mined coal. The rate was established in 1976. The money is then split between the federal government and the state where the coal was mined. Coal companies also pay a $3 fee annually for each acre of land leased.

Government auditors have in the past questioned whether the rate provided an appropriate return, though they did not make specific recommendations to raise it. Industry groups counter that any increase in royalty rates will hurt consumers and threaten high-paying jobs.

President Obama said during the State of the Union address Tuesday that he would push to change the way the federal government manages its oil and coal resources.

The review will look at such issues as how, when and where to lease, how to account for the public health impacts of coal, and how to ensure American taxpayers earn a fair return on their resources.  An administration official noted that reviews of the federal coal program have occurred twice before, once in the 1970s and again in the 1980s, and pauses on the approval of new mining leases accompanied each review.

Jewell said some exceptions to the moratorium will be allowed, most notably for small lease modifications. And while the federal government will proceed with environmental reviews for pending lease applications, no final decision will be made.

The administration held hearings in Montana, Wyoming, Colorado and New Mexico last year on the federal coal program. Several people representing tribes, local ranchers and environmental groups spoke in favor of increasing royalty rates, saying it would hasten the transition to cleaner energy sources.

Several GOP lawmakers sent staff to relay their concerns about the Interior Department's efforts.

For example, Penny Pew, a district director for Republican Rep. Paul Gosar of Arizona, said that "President Obama and his agency minions are trying to put the coal industry out of business by imposing a flurry of draconian mandates not based in reality."

Industry officials also voiced concerns.

Meanwhile, David J. Hayes, a senior fellow at the liberal-leaning Center for American Progress, said Thursday the current rules for coal mining on federal lands were written when people could still smoke on planes and dump sewage in the ocean.

"President Obama and (Interior) Secretary (Sally) Jewell are absolutely right to launch this comprehensive review and to set the federal coal program in a more fiscally and environmentally responsible direction," Hayes said.

The Associated Press contributed to this report.