Study recommends charging US mining companies for social costs of burning coal

  A group of U.S. researchers has recommended changes in U.S. government policies toward coal mining on federal lands so that the social costs of burning coal are taken into account.

Coal mined on leased federal lands accounts for 40 percent of all coal mined in the United States and 13 percent of U.S. energy-related greenhouse gas emissions. And most coal from federal lands comes from the Powder River Basin in Wyoming and Montana, which can be mined at very low cost.

While the the U.S. Department of the Interior is reviewing its program due to concerns that the revenues from permit auctions and royalties are too low, the group of nine experts who reviewed the federal program has formulated their recommendations with an aim to bring in more revenue and offset the social costs of burning coal, including carbon dioxide (CO2) emissions, water pollution and land degradation.

Coal mined from the Powder River Basin federal lands in Wyoming and Montana is significantly underpriced relative to its social costs, noted the researchers, who published their recommendations in the journal Science. Just taking into account CO2 emissions, the social costs of burning coal are as much as six times the market price.

"CO2 aside, the social costs not covered by the royalty payments include emissions of coal-bed methane, water pollution and land degradation from mining activities," Charles Kolstad, an author on the paper and a senior fellow at the Precourt Institute for Energy and at the Stanford Institute for Economic Policy Research. "And the cheap coal from federal lands depresses prices for coal from private lands."

The group found that the way the U.S. government sets royalties on coal leaves room for mining companies to artificially reduce their payments by choosing whether to pay based on the sale price at the mine or on the delivered price to the power plant. They may sell the coal to a subsidiary at an artificially low price, reducing their royalty payment, and then the subsidiaries sell the coal at a higher price and the company pockets the difference.

In addition, Kolstad said, the federal government auctions the leases in a way that has led to a single bidder in more than 90 percent of leases from 1990 to 2012. Almost all new leases are for extensions from existing surface mines. Companies other than the one with the infrastructure already in place usually cannot compete economically.

Not surprisingly, he said, the lease revenue from the auctions has been lower than if leasing were a more open process.

The researchers believe that policy changes should include:

-- charge mining companies for the social costs of CO2 emissions;

-- make the auctions competitive;

-- and, base royalty payments on actual revenue.

They argue that these changes could raise the cost of coal and make less polluting forms of energy like oil or natural gas more appealing. Estimates suggest that the financial pressures could reduce emissions by roughly three-quarters of that expected from regulations currently under litigation, called the Clean Power Plan, which U.S. President-elect Donald Trump has said he will abandon.

"Although politics is changing in Washington, the arguments and observations in this article reach across party lines," Kolstad was quoted as saying in a news release from Stanford University. "Valuable government revenue is being lost and low-cost actions to reduce greenhouse gases are being forsaken."

source Xinhua