Energy:

Legislative Changes Are Needed To Authorize Emergency Federal Coal Leasing

RCED-84-17: Published: Aug 2, 1984. Publicly Released: Aug 2, 1984.

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Pursuant to a congressional request, GAO reviewed the Department of the Interior's administration of coal leases, focusing on: (1) Interior's emergency lease sale regulations; and (2) the need for legislative and administrative remedies to emergency leasing.

Interior is required by law to issue federal coal leases by competitive bidding and ensure that the government receives fair market value for the coal. GAO found that Interior has had difficulty carrying out emergency leasing in a manner consistent with the requirements for competitive bidding and receipt of fair market value. Emergency leases are limited to situations where the lease applicant has a clear economic and competitive advantage over other bidders, and these leases have consistently been offered to meet the needs of the applicant requesting the lease sale. GAO also found that 33 percent of the emergency leases issued in an 18-month period did not produce coal for at least 3 years, as required by Interior regulations, and were not terminated. In addition, GAO found that Interior's method for determining fair market value is flawed because: (1) Interior does not assume that a lease tract has a higher value to an emergency lease applicant than it would on the open market; and (2) Interior's assumption that more than one bidder may be interested in an emergency lease tract has led to unrealistic estimates of the value of lease tracts to emergency lease applicants.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Diligent development of federal coal leases is a volatile issue on which the cognizant Senate and House legislative committees disagree. If lease negotiation is authorized, it will have to come on the coattails of diligence legislation. The latest bill does not provide authority for negotiated emergency coal lease sales. The Secretary of the Interior does not support the concept.

    Matter: To meet the emergency needs of existing mining operations, Congress should amend the Mineral Lands Leasing Act of 1920 to authorize the Secretary of the Interior to conduct emergency federal coal leasing using negotiated lease sale procedures for carrying it out. The legislation should provide for: (1) a statement of objectives to be achieved through emergency leasing; (2) opportunity for public comment and expressions of competitive leasing interest before conducting negotiated sales; (3) development of guidelines by the Secretary for negotiators to follow which, at a minimum, provide for access to economic and geological data, disclosure and protection of proprietary information, factors to consider in negotiating lease terms and reasonable value for the federal coal, and public disclosure of lease sale results; and (4) promulgation of regulations by the Secretary for designing and implementing an emergency coal leasing program consistent with its objectives and the above standards.

 

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