Following up on President Obama's vow in his most recent State of the Union Address to more effectively manage federal coal and oil resources to "better reflect the costs they impose on taxpayers and our planet," the United States Department of the Interior announced a moratorium on most new coal leases on federal lands while the Department undertakes a comprehensive review of its leasing procedures. About 40 percent of the annual coal production is mined from federal lands pursuant to leases administered by the Department, and that coal accounts for approximately 10 percent of the greenhouse gas emissions in the United States each year. The leasing program was last reviewed in 1986, and the Department asserts that this moratorium is the latest in a series of periodic reviews.

The moratorium does not affect existing leases, which reportedly include about 20 years of reserves. The Associated Press estimates that approximately 30 applications currently in process in nine states could be blocked as a result of the moratorium

The review of the leasing program during the moratorium will take the form of a Programmatic Environmental Impact Statement ("PEIS") prepared by Interior's Bureau of Land Management ("BLM") addressing three main concerns identified during 2015 listening sessions:

  • Whether BLM receives a fair rate of return for the coal that is mined—about 90 percent of coal lease sales have only one bidder, and the royalty rate of 8 percent for coal mined underground and 12.5 percent for surface mines may not be appropriate.
  • The impacts of the coal leasing program on climate change—burning coal results in the release of about twice the carbon dioxide emissions of natural gas, and the BLM identified tension between the coal leasing program and reduction of greenhouse gas emissions.
  • Recent reductions of coal production and financial difficulties faced by some coal producers, including the ability of bankrupt entities to reclaim federal land after coal mining has ended.

Exemptions from the moratorium include leases for metallurgical (as opposed to thermal) coal, leases for which National Environmental Policy Act ("NEPA") review is complete and a record of decision issued, small lease extensions, and certain emergency leases.

In a related development to address greenhouse gas emissions from federal lands, BLM recently proposed rules to limit venting, flaring, and leaks during oil and natural gas production activities on federal lands. Comments on the proposed methane rules are due April 8, 2016, and BLM has indicated the methane rules will be finalized by the end of this year.

BLM has also indicated that the review period during which the moratorium will be effective should last about three years. The next step will be the preparation of a scoping PEIS, which is planned for late 2016.

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