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Changes afoot for U.S. coal industry

Obama hinted at new coal policies to reflect low-carbon agenda during State of the Union.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Updated Jan. 15, 2016 at 10:41 AM
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WASHINGTON, Jan. 15 (UPI) -- With the U.S. coal sector showing signs of weakness, the Interior Department is pausing new coal leases and launching a review of the federal coal program.

In his final State of the Union address earlier this week, President Barack Obama said the nation's energy policy priorities should focus on a transition away from "old, dirtier energy sources."

The U.S. Energy Information Administration estimates total U.S. coal production will decline 3 percent this year as the country pushes a low-carbon agenda.

"Rather than subsidize the past, we should invest in the future," the president said. "That's why I'm going to push to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet."

U.S. Interior Secretary Sally Jewell on Friday announced the next steps in the Obama administration's plans for the coal industry. Last year, she called for a dialogue on coal during an address before the Center for Strategic and International Studies.

"How do we manage the program in a way that is consistent with our climate change objectives?" she asked last year.

The department said it is launching a review of the federal coal program, and will prepare a Programmatic Environmental Impact Statement to identify potential reforms, potentially including leasing mechanisms and royalty rates. While the review is ongoing, the Interior Department is pausing new coal leasing on public lands, with continued mining under existing leases. The review process is expected to take three years.

"Given serious concerns raised about the federal coal program, we're taking the prudent step to hit pause on approving significant new leases so that decisions about those leases can benefit from the recommendations that come out of the review," said Secretary Jewell.

"During this time, companies can continue production activities on the large reserves of recoverable coal they have under lease, and we'll make accommodations in the event of emergency circumstances to ensure this pause will have no material impact on the nation's ability to meet its power generation needs. We are undertaking this effort with full consideration of the importance of maintaining reliable and affordable energy for American families and businesses, as well other federal programs and policies."

The department said that, based on current production levels, companies have approximately 20 years of recoverable coal reserves currently under lease on federal lands.

The department is also launching reforms to improve transparency in the federal coal program. The federal Bureau of Land Management is expected to make the leasing process transparent and accessible online, to clarify its consideration of royalty rate reductions, and its possible adjustment of leases to authorize coal lessees to capture and sell waste methane.

"There is no doubt this is a serious blow to the US coal industry, with an estimated 40 per cent of the coal mined on federal land," said Oil Change International, which advocates for a low-carbon economy.

Arch Coal, one of the largest coal companies in the country, filed for Chapter 11 bankruptcy protection Monday. Fitch Ratings said the default from Arch Coal boosts the coal industry's 12-month trailing default rate by 4 percent from the end of December.

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