Coal Extraction on Federal Land: A Hidden Fossil Fuel Subsidy

Fossil fuel subsidies are not a thing of the past. Economists have long argued that the lack of proper externality pricing to counterbalance the negative effects of climate change are, in effect, a subsidy. However governments around the world continue to directly subsidize fossil fuels on top of the externality generated from pollution. In some countries, gasoline and diesel fuel are subsidized at the pump. The United States does not engage in this form of fossil fuel subsidy (although our gasoline taxes are too low maintain our road budgets, but that is a different story). The United States instead subsidizes fossil fuels through exemptions in our tax code. However, the most direct yet hidden way the United States federal government subsidizes fossil fuels, particularly coal, is by allowing fossil fuel extraction to continue unabated and expand on land owned by the federal government. Fossil fuels extracted from BLM land account for 40% of the nation’s coal supply and 24% of U.S. greenhouse gas emissions. Thus, when it comes to protecting the global climate, BLM land is no trivial matter, given that according to top scientists 92% of U.S. coal reserves must be left in the ground to keep the climate from warming by more than 2°C.

The Bureau of Land Management allows mining companies to extract coal and pay only 12.5% royalties on the coal they extract from land owned by the federal government. This means that coal companies pay the government only $1.63 for each ton of coal they extract from land owned by the government. In fact, this absurdly low rate has been set by law so there is nothing the Obama administration can do about it – it would take an Act of Congress to change that. However, the administration does have control over which coal reserves are opened up for mining. During the Obama administration, the BLM has leased reserves containing 2.2 tons of publicly owned coal, unlocking 3.9 billion metric tons of carbon dioxide. It is true that Obama has made strides in reducing U.S. coal consumption through the Clean Power Plan. However, Obama’s “all of the above” energy strategy means that he will continue to encourage production of fossil fuels in the U.S., even production of the dirtiest fuel, coal. According to Grist’s Ben Adler, Obama has a “split personality on coal” because “he’s trying to get us to burn less of it even while we continue to mine tons of it.”

It is possible for the BLM’s decision-making process to change in favor of the environment while continuing to pursue this “all of the above” strategy. However, one of the biggest problems in the BLM’s decision-making process is their lack of consideration for for the social cost of carbon, or SCC for short. The federal government assesses the SCC at $37 per tonne of carbon dioxide, even though some estimates are as high as $220 per tonne. Greenpeace is calling for a moratorium on coal extraction on federal land followed by a review to make sure it does not counteract the administration’s Climate Action Plan.

However, the administration shows no sign of decreasing coal production on federal land. On May 13 I saw EPA Administrator Gina McCarthy speak at the Commonwealth Club’s Climate One program. You can listen to audio of the program including the interview and the questions here. I asked her what the administration plans to do about emissions from fossil fuel extraction on federal land. She refused to answer my question, and spoke vaguely of the trade-offs between energy availability and climate change, concluding her non-answer by saying “We’re gonna continue to make those decisions.” However, the fact remains: fossil fuel extractions on federal land threaten to destroy our chances of remaining within 2°C of preindustrial temperatures.