On Federal Coal Leasing

by Bruce Huber — Tuesday, Jan. 19, 2016

Those of you who look for interesting news headlines buried in your Friday news feeds will have found quite an interesting little nugget on the front end of this MLK weekend. The Obama administration made good on a State of the Union hint and announced that it is initiating a moratorium on new coal leases on federal land. The federal coal leasing program has received a good deal of appropriate scrutiny in recent years, but for the most part the Interior Department had continued with business as usual. Until now.

The natural resource context may be somewhat foreign to regular readers of this blog. The regulation of access to (and sale of) our natural resources is quite a bit different than the forms of regulation that receive the most interest from regulatory scholars. For one thing, the resource regulator’s role is more varied. Where a typical regulator is generally concerned with designing and enforcing rules of conduct within a particular industrial sector, natural resource managers often serve as landlords of broad swaths of federal land. As the current standoff at Malheur Wildlife Refuge in Oregon suggests, federal land managers often wear multiple hats—part law enforcement, part tour guide, part scientist, part landlord, part salesperson, and so forth.

This assortment of roles is a direct consequence of federal law. The statutes that govern our two largest land management agencies, the U.S. Forest Service (USFS) and Bureau of Land Management (BLM), are built on “multiple-use” mandates that say very little about how those agencies should allocate access among the various groups that would like to use our public lands. Snowmobilers, ranchers, off-roaders, hunters, oil & gas firms—all of these groups and many more must share the use of federal land, and individual land managers generally write the rules. Of necessity, the land management agencies must be generalists. The officials I’ve met try hard to balance the interests of their various clienteles, even though they are stretched thin by shrinking federal budgets.

Which brings us back to coal. Federal coal leasing rules have come under fire for several reasons. The first and most obvious line of attack comes from the “Keep It In The Ground” folks—parties who object wholesale to federal coal leasing on the basis of coal’s contribution to climate change and air pollution. A second line of attack comes from those who argue that federal coal policy sells coal too cheaply, at a price well below its fair market value.

It’s this second criticism that I’ve focused on in a law review article published last month in the California Law Review. To be sure, coal is not the only resource that doesn’t fetch fair market value. Back to the Malheur Wildlife Refuge for a moment: as you’ve probably read, ranchers on BLM and USFS lands pay only a fraction of the fair market value of their grazing rights. (Some ranchers dispute this, claiming that private lands are not a good comparison. Perhaps, but BLM and USFS grazing fees are still a small fraction of the fees charged by state land managers and even other federal agencies, like the Department of Defense.) In fact, there are many federal resource management programs that are vulnerable to the same criticism—they fail to collect fair market value for the resources under their management.

Certainly, one important reason for this failure is that agencies are indeed understaffed and wear multiple hats. Federal law does not task them with maximizing revenue; far from it. As I’ve said above, these agencies are ordinarily expected not only to manage resource sales, but also to conserve those resources, protect ecosystems, study flora and fauna, and much more. But the larger reason that agencies sell public assets cheaply has to do with—wait for it—politics. Incumbent resource users wield a great deal of influence with local resource managers. In a subsequent post, I’ll explain how this works in the case of coal, and hopefully shed some light on why the Interior Department concluded that a moratorium was necessary.

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