A Programmatic EIS on Federal Coal Will Show . . . ?

The Interior Department is considering the future of coal mining on federal lands. If it weighs more than abstract calculations of expected future electricity costs, the review might be worthwhile.

So the Secretarial Order (Order No. 3338) on the “pause” was recently released and we took a look at what it tells Interior personnel conducting this review they should view as the priorities in the Nation’s coal leasing “program.”

The three “main” priorities named in the order—fair return on the coal, climate change, and coal-dependent communities’ economic future in a new era of declining coal markets—are all weighty considerations, to be sure.  One imagines that finding “fair return” on assets—coal deposits—which are fast diminishing in cash value will be something like finding the quark.  It’s even harder to see that future with so many coal operators declaring bankruptcy today, the better to shed all those reclamation and legacy containment liabilities (one assumes).

But in this post we consider the climate change implications of continuing coal leasing on federal lands and how a “programmatic” environmental impact statement (PEIS) examining the coal leasing ‘program’ as a whole could go.  If the PEIS is a replay of other PEISs done by the Interior Department recently, it may be worth little more than the delay it causes.

Time for a Change? 

In a sense, just agreeing to undertake this examination is progress.  Less than a year ago {see our story} the Department’s lawyers were in court denying there even was a federal coal leasing ‘program.’  But what good could come of this review now that that a PEIS is being prepared?  Could the Department decide to leave all the coal not already committed to leasing in the ground?  The argument’s been made that federal mining statutes preclude that result, but that’s speculation at best.  The part of the law these arguments invoke says that “the orderly and economic development of domestic mineral resources . . . to help assure satisfaction of industrial, security, and environmental needs” is one among more than a dozen considerations for the government to weigh in decisions of this kind.  See 43 U.S.C. § 1701(a)(12).

Especially where coal is the question, this provision gives little force to the argument that coal deposits on federal land must be put up for sale.  It’s not as if someone else might come along and steal this coal if it sits there.  And the price of coal has collapsed globally.  Collapsing domestic prices have forced most remaining firms to seek export opportunities, generating the perverse effect of further depressing prices.  (As prices fall, coal makes other fuels’ economic viability that much tighter.  But finding fair measurements of that effect is hard.)  So to argue that keeping supplies up with more federal coal is somehow necessary to assure domestic needs seems, well, disingenuous.  As the Government Accountability Office found in 2014 (see graph), there’s a lot of non-federal coal out there and it would probably benefit competitively if federal coal supplies were cut.  One private consultant recently estimated that fully two thirds of the world’s coal mines are losing money.Federal Coal Regions Map

If coal has a leg to stand on in arguing that Interior must keep leasing after the pause, this isn’t it.  But how to cut these supplies exactly?  That’s probably the hardest part.

Adding the Social Cost of Carbon to Leasing Charges?

The option that most everyone thinks will garner the bulk of attention is resuming the coal leasing program at a reduced scale and adding a new charge to the mix of monies already being collected: an assessment recouping the costs to society of mining and burning coal, i.e., emitting the carbon dioxide (CO2) therein into the atmosphere.  This “social cost of carbon” (SCC) for CO2 and fugitive methane (CH4) emissions has been gradually working its way into federal regulatory decisions like this one since the number was first released in 2010.

Adding SCC charges to coal leases would be especially tricky, though, both legally and economically.  As this extensive analysis by Resources for the Future found last year, fitting an SCC premium into the current mix of charges in such a way that it actually accomplishes the social goal (emitting less CO2 and CH4) would be hard.  Given how coal is bid on and priced, firms could simply adjust their bid prices downward to reflect the expected charges (over 90% of coal leases receive only one bid).  The net result would be no change in what coal leases cost and, thus, no real SCC-induced changes in emissions.

If, on the other hand, the market as a whole doesn’t discount accurately and federal coal prices actually increase, then all that that would likely accomplish is to push domestic demand to non-federal coal supplies (which are, themselves, dirt cheap).

Legally, moreover, it’d be hard to anticipate the reviewing court’s expectations about where and when to assess an SCC premium in the leasing transactions, whether at the leasing stage or at the production/royalty stage.  The statutes governing these decisions weren’t worded to accommodate SCC-like thinking.  They were fit to a more traditional view of “environmental” costs as (relatively) localized and economic benefits as (relatively) dispersed.  If you flip that equation, it may start to look like SCC charges on federal mineral leases are a square peg in a round hole.

The bigger question, of course, is how the future of coal stacks up against cleaner, renewable sources of energy like geothermal, wind and solar.  Finding the price differences between those would be key information here.  But it is unlikely Interior will find such information for use in the PEIS.

Indeed, it might be impossible to figure out that difference to any actionable confidence level.  Even if you take the U.S. Energy Information Administration (EIA) estimates at face value, so-called “levelized costs of electricity” are all over the map.  According to EIA estimates in 2015 (with 2013 dollars), new wind generation was at about $82 per megawatt hour (MWh); photovoltaic solar was around $193 per MWh; each was still subject to variable mark-ups for their intermittency; and new coal-fired generation with carbon capture and sequestration (CCS) was at about $160 per MWh.

The trouble with the estimates is all of the questionable-to-dubious assumptions that have to be made in order to derive them.  For example, an estimate of what it would cost to build a new coal-fired generating station with CCS is, well, extremely low confidence given the fact that no U.S. CCS system has yet been built and the one the government tried to build became a giant boondoggle, billions over budget and years behind schedule {see Darren Samuelsohn’s 2015 article in Politico here.}

Use of figures like EIA’s, in short, will simply ensure the subsequent uselessness of any resulting PEIS.  If they don’t prove mistaken shortly after they inform the document, it will likely be because they represent a “reality” so detached from reality that no hindsight could challenge their technical validity because they were pure fiction from the start.

A Better Alternative: “Back-casting” From a Cumulative Carbon Framework

If sorting out alternative possible futures for the federal coal program with an SCC premium added to future leases isn’t so great an option, what else is there?

Even a PEIS’s primary purpose is “to serve as an action-forcing device to insure that the policies and goals defined in [NEPA] are infused into the ongoing programs and actions of the federal government.”  40 C.F.R. § 1502.1.  NEPA’s policies and goals are abstract and oriented to the (very) long-term.  But that may signal the best approach after all.earth tree

As the Lab noted in our first post on the pause, at least where GHG mitigation is concerned, the most “action-forcing” aspect of NEPA here is § 102(2)(E)’s mandate that agencies “study, develop, and describe appropriate alternatives to recommended courses of action in any proposal which involves unresolved conflicts concerning alternative uses of available resources.”  42 U.S.C. § 4332(2)(E).

The “resource” in question isn’t just coal.  With climate science now resolving a cumulative carbon framework with ever-increasing granularity, the actual limiting “resource” in question when Twenty-first Century fossil fuel development is concerned is what remains of our atmosphere’s capacity to absorb more carbon.  It’s the global sink, so to speak, that is the chief resource.  In other words, fossil fuel reserves aren’t the limiting resource they once were.  The Earth’s capacity to withstand continued combustion is.

As human civilization approaches the trillionth ton of cumulative carbon emissions over its history (business-as-usual will put us there before 2050), the prospects for mitigating climate damage to within tolerable limits keep dwindling.  Analysts studying those prospects put infrastructure and other “lock-in” decisions—like more coal leases—at the top of their lists of what to target first.  Opinions differ on which of these emissions commitments are the worst.  And they differ on the magnitude of socioeconomic dislocation(s) that could result from each target’s being eliminated.

Monetization might help in this connection, but probably not.  What’s needed first is some plausible goal from which various causes and effects can be weighed (qualitatively), most likely by comparing alternative scenarios.  Enter the “back-cast”—the forecast’s long-lost sibling.  As this group of researchers recently calculated for 16 countries which collectively account for about three quarters of global emissions, back-casting from a 2°C goal can yield some basic targets in every economy.  A follow up post will consider how such a back-cast for the U.S. might view the federal coal program.

{Image:  glassy carbon via wikimedia commons}

I teach environmental, natural resources, and administrative law at Penn State Law. Before teaching I was an enforcement lawyer at U.S. EPA. Along the way I've done work for environmental nonprofits and written a fair bit about NEPA.
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